One of the best investing developments in recent years is the emergence and growth of Exchange Traded Funds (ETFs). They are opening up a whole new world for many investors.

An Exchange Traded Fund is a basket of securities, and it trades just like a single stock would. ETF’s are somewhat of a buzzword these days and there’s good reason why.

ETFs can be created to follow a broad market, an international market, an industry, or some other investing composition.

Typically, an ETF will offer you solid diversification and value. Rather than buying multiple stocks to create your own basket—and paying the extra commissions—you just buy the ETF.

Many investors use Exchange Traded Funds to invest in foreign markets, like China. Three ETFs for China are: FXI, PGJ and EWH.

Let’s look at EWH.

This Exchange Traded Fund is tied to the Hong Kong market. The ETF is very heavy in financial services (54.48%) and 56% of its holdings are spread among 10 companies.

EWH was at $17.91 on July 6, 2007, which is just slightly off it’s high of $18.02. If your broker doesn’t offer enough detail on an ETF, try finance.yahoo.com.

It’s also possible to earn dividends with ETFs.

As to growth, EWH is up 5.19% on the year, 28.09% over the last 12 months and has a three-year return of 21.51%.

Before you invest in an Exchange Traded Fund, do your homework. Here’s a starter list of items you should know before purchasing any ETF.

1. What market, country, or sector does it focus on and how does that market, country or sector look from a growth perspective?

2. What are the main holdings?

3. Is the ETF diversified well or is it being driven by one or two main equities?

4. Would it be better to just purchase the best performing stocks of the ETF individually and create your own basket?

For investors who want to get into a foreign market, but aren’t sure where to start, Exchange Traded Funds can be the perfect vehicle.