Thanks to Russia's abundance of natural resources and growing consumer economy, funds that track the country have been on a tear for much of this decade.
Now, the outlook for Russian stocks is growing ominous. The WSJ's Return on Investment blog says the risks of investing in Russia "are far greater than most ordinary investors realize.... It isn't so much about the invasion of Georgia...as what that war, along with other recent events, says about the regime and the country." (At last count, according to ROI, Americans had more than $3 billion in Russia funds.)
Russia's risks go beyond the feud with Georgia: Half of the country's stock market is made up of oil and gas stocks, and natural-gas giant Gazprom accounts for a whopping 26 percent, says ROI.
Timothy Hubbard of ETF Trends reports that the Market Vectors Russia ETF (symbol RSX) is down 23 percent year-to-date and has dropped nearly 4 percent so far this week. Instead of focusing on Russia, Hubbard suggests that investors look to diversified exposure through the SPDR S&P Emerging Europe ETF (GUR), which includes a 35.6 percent weighting in Russia, 22.9 percent in the U.K., 12.2 percent in Poland, and 10.6 percent in Turkey.
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vzTQge 4:23PM March 02, 2009