How to invest in Russia - Russian ETFs and more...

Russia is a vast, resource rich country.

Russia has huge reserves of oil, gas and other natural resources. Due to its geographical location, Russia finds it easy to find customers for its energy resources via pipelines to densely populated Europe to the West.

The Eastern parts of Russia are sparsely populated, but they border China which has a growing economy and an insatiable thirst for oil and gas.

As well as the extensive oil and gas industry, Russia has a growing middle class and internal demand for goods and services is increasing rapidly. Russia is part of the BRIC group of nations. BRIC stands for Brazil, Russia, India, China, and these four countries represent huge new emerging economics that no investor can afford to ignore.

Exchange Traded Funds are traded like shares, but allow investors to gain exposure to a basket of underlying assets. For investors wanting an ETF that invests in Russia, one option is the iShares MSCI Eastern Europe ETF (stock symbol: IEER). This does not invest solely in Russia, but Russian stock holdings are a significant part of the ETF. As you might expect, the ETF has a big weighting in energy companies, but there is also exposure to mobile telecommunication stocks. Financial stocks, utilities and healthcare are also represented, making this a diversified ETF. There is a quarterly dividend paid from this ETF, but as it is concentrated on growth rather than income the dividend is modest.

To get exposure to the biggest emerging markets the investment world has to offer, the iShares FTSE BRIC 50 (stock symbol: BRIC) contains holdings of the 50 largest companies from the four BRIC countries. Russian holdings in the ETF include the energy giant Gazprom as well as companies in the steel, nickel, gold and mobile telephone industries.

Other ETFs with a Russian investment theme include the Lyxor Russian Titans Index ETF and the DB X-Trackers MSCI Russia 25% Capped Index ETF (stock symbol: XMRC).

Unit trusts can also be held within an ISA or SIPP. They tend to have high initial charges unless they are bought through a financial advisor or discount broker such as Hargreaves Lansdown.

The best known unit trust with a Russia theme is the Neptune Russia & Greater Russia Fund. This fund was launched in 2004 and performance has been extremely volatile. A dividend is paid biannually. The Neptune Russia & Greater Russia Fund contains a number of holdings, with the greatest weighting in the materials and energy sectors. The overwhelming majority of the fund's money is invested in Russia, so this is a big play on the strength of the Russian economy.

As less well known Russian investment opportunities, the F & C Russian Investment Company and the Pictet Russian Equities fund may also be worth considering.

As well as unit trusts that only invest in Russia, it is also possible to invest in unit trusts that invest in the BRIC countries of Brazil, Russia, India and China. Popular BRIC funds include the Allianz RCM BRIC Stars with approximately a 25% weighting in Russian stocks, and the Schroder ISF BRIC fund.

All of the ETF and Unit trusts mentioned here can be held within a the stocks & shares element of an Individual Savings Account (ISA) or a Self Invested Personal Pension (SIPP). Be sure to do your own research before making any investment decisions, or consult an independent financial advisor.

As well as ETFs and Unit trusts, a significant number of Russian companies are listed on the London Stock Exchange, so it is possible to directly invest in these companies.

The author of this article is not authorised by the UK authorities to give financial advice. This article does not consitute financial advice. Before making investment decisions consult an independent financial advisor.