MichaelMolinski

San Francisco (MarketWatch) — For those of you who aren’t stock pickers, but would like to have a portion of your portfolio invested in Latin America, mutual funds and exchange-traded funds can be good ways to invest.

They bring instant diversification to the region as a whole for a small fee, as opposed to buying each stock separately. And in the case of mutual funds, they can also bring professional managers with experience in the region that you might not have yourself.

One of my favorites is the J.P. Morgan Latin American Fund JLTAX, +0.52% The more I look at this fund, the more I like it. Its holdings represent what I believe to be the future of Latin America.

The top five holdings are all companies that I’ve mentioned in past columns on consumers, energy and finance: Itau Unibanco Holding SA ITUB, +0.28% OGX Petroleo e Gas Participacoes SA OGXPY, +0.00% Companhia de Bebidas das Americas ABV, +0.00% America Movil AMX, +0.66%  and Banco Bradesco BBD, -2.00% Like most Latin American funds, one-year performance isn’t impressive at -10.11% through last week, but it performed a solid 4.66% over the past five years. It also recently passed five years, and qualified for an initial three stars from Morningstar. The downside is it has a load fee, and a high expense ratio of 1.89% in 2011.

I also like Fidelity Latin American Fund FLATX, +0.05% which gets four stars from Morningstar. Its holdings are a combination of the blue-chips of Latin America, such as Petrobras and Vale VALE, -0.83% but it is also weighted high in some of the stocks which I believe will benefit from the rise in the middle class in Latin America, such as America Movil and Wal-Mart de Mexico (WALMEXV). And, it’s a no-load fund with a low management fee of 1.0%. Its one-year performance was -10.10 and its five-year performance was 3.84%, but its 10-year performance was an amazing 17.81% — the benefit of being around that long!

BlackRock Latin America MDLTX, +0.46%  receives a high rating for its long-term stability and performance, but it hasn’t done well lately, with one-year performance coming in at -16.66%, although five-year performance is a strong 4.60% and over 10 years is 19.22%. It is still heavily weighted in the long-term blue chips of Latin America, but look for a shift soon toward consumer stocks. It has a load fee and a 1.55% expense ratio.

T. Rowe Price Latin America Fund’s PRLAX, +0.40%  strength is the fact that it’s a no-load fee that has an expense ratio of only 1.25%. But like BlackRock, it’s still invested heavily in blue-chips and, at quarter-end, had a basic materials allocation of 15%, although it could benefit from its heavy weighting toward financial services.

DWS Latin America Equity SLANX, +0.34% gets marks because it’s been around a long time, but its performance has lacked in both the one-year, five-year and 10-year periods, and it has seen management turnover. Still, there are some recent indications that it is moving into sectors like consumers, energy and financials. I see that as a good thing. And often times in the mutual fund industry, what has done well in the past often ends up at the bottom of the pack the next five years, and vice versa.

Overall, there aren’t many Latin American mutual funds to choose from. One last fund I’ll mention is MFS Latin American Equity Fund MLEAX It has only been around since September 2010 and its initial performance has been only so-so, so it’s too early to give an opinion. But the holdings are interesting. On one hand, it isn’t any different than most in that two of its top holdings are Petrobras and Vale, but after that its holdings are a bit innovative, with financial services and consumers high on the list.

For passive investors who prefer exchange-traded funds for their low cost and trading flexibility, the iShares Trust S&P Latin America 40 Index Fund ILF, +0.28%  is a large-cap fund, tilted heavily toward industrials, while the SPDR S&P Emerging Latin America ETF GML, +0.44%  has a broader basket of about 100 stocks as does the Market Vectors Latin America Small-Cap Index LATM LATM’s 80-company portfolio is also slightly tilted toward the consumer sector, which is a plus for investors looking to get away from large-cap industrial and commodity driven companies.

So, there you have it! There are other issues involved when picking funds in Latin America. You may want to look at my recent column for some of those. For example, why not just buy a bunch of stocks instead of a mutual fund or ETF? If you have the experience, the money, the time and an appetite for risk, I would encourage you to do so. If not, these funds will at least get you started on investing in Latin America.

Note: To avoid conflicts of interest, I don’t invest directly in Latin American securities.