You wouldn't buy a car without test-driving it, so don't invest in a fund without checking under the hood

Investor Beware: Fund Names Dont Tell the Whole Story

Know thy fund.

These three words make all the difference in making intelligent fund choices. These three words also tend to get tossed out a window by many investors because, hey a fundll do what it says itll do, right? So if you wanted to, say, get broad exposure to China, all youd need to do is buy any China ETF, and youd be set, wouldnt you?

Sure, youd be invested in Chinese stocks. But picking a China ETF because the funds name has China ETF in it, then considering yourself properly exposed, would be like walking into Macys blindfolded, grabbing three random articles of clothing, putting them on and proclaiming, Im properly dressed!

You might technically be dressed, but it very well might not be proper.

To really drive the point home, heres a visual aid not of yours truly in a halter top, jeans and a pair of athletic shorts over the jeans, but of three China ETFs. All three have China and ETF in the name, and all three would, in fact, get you invested in Chinese stocks:

Youre currently looking at the graphical sector breakdowns of the iShares China Large-Cap ETF (FXI ), the iShares MSCI China ETF (MCHI ) and the SPDR S&P China ETF (GXC ). (The color codings for each sector arent identical, but very close. For instance, the darkest blue is financials, the darkest green is industrials, etc.)

At a glance, then, would you say that an investor in FXI is exposed to the same China that an investor in GXC is?

I sure wouldnt.

For example, lets look at FXI, which at $5.5 billion in assets is the largest, most popular China ETF by far.

Lets say you want to invest in China, and you buy the FXI. More than half your money is being invested in financials. Thats great if youre really bullish on Chinas financial sector, but not great if you just want to be broadly exposed to China in general.

For comparisons sake, lets say you want to invest in America, and you buy the largest U.S. equity fund, the SPDR S&P 500 ETF (SPY ) only 16% of your ETF dollar would be invested in financials. And the biggest concentration (information technology) would only be 19%. So, your chart would look like this instead:

Thats broad exposure.

Funnily enough, you can get broader exposure than the FXI from the very fund provider that offers FXI iShares MCHI, while still financials-heavy, is more evenly exposed to other sectors. Meanwhile, State Street Global Advisors GXC has the best spread of the trio in that respect. Ergo, if you want to be as exposed as possible to all of Chinas sectors, GXC would make the most sense.

I should point out that none of this is a recommendation for or against any of these three China ETFs. When selecting a fund, you need to look at more than sector diversification you also need to consider the sizes of the companies your fund holds, how much its focused on defense/growth, expenses and other factors.

In fact, I actually get my Chinese exposure through the Guggenheim Small Cap China ETF (HAO ), which invests in much smaller companies than any of the aforementioned funds and has a much heavier tilt toward consumer stocks. (Just my personal bent.)

No, this conversation is merely a reminder that theres more to funds than their names.

And considering youre investing your hard-earned money to secure your future comfort, you owe it to yourself to do more than just look at a funds name, anyway.

More Information on China ETFs

Kyle Woodley is the Deputy Managing Editor of InvestorPlace.com. As of this writing, he was long HAO and SPY. Follow him on Twitter at @KyleWoodley .