COMMENT
Putin' Your Money At Risk

"Russia is a riddle wrapped in a mystery inside an enigma." ~ Winston Churchill

BP (LSE: BP.) has operations in Russia, and so too have Pilkington (LSE: PILK), SABMiller (LSE: SAB) and Gallaher (LSE: GLH). Now, Dixons (LSE: DXNS) has said it will be dipping its toes into one of the world's fastest-growing markets.

With increasingly more companies investing in Russia, how can private investors buy Russian shares?

Firstly, there are a number of ways to invest in Russia. The Russian stock market is open to both private and institutional investors. Unlike the Indian stock market, which is largely closed to foreign investors, anyone can buy Russian shares. Some of the most popular are oil and energy shares that are listed on the Russian Trading System. Telecoms are all the rage, too, given that Russia's mobile market is reckoned to be the second-fastest growing in the world.

You can also buy shares in a handful of Russian companies listed on foreign stock exchanges, which avoids the need to find a Russian broker. These include Vimpel Communications (NYSE: VIP), which provides wireless telecom services to 94% of Russia's population, and international telecom set-up Rostelecom (NYSE: ROS). Another is dairy company Wimm-Bill-Dann (NYSE: WBD), which has a network of 24 companies in seventeen Russian cities.

Energy companies are well-liked, too, especially with the world in the grip of a huge commodity boom. After all, Russia is one of the world's biggest exporters of oil and gas. Consequently, oil companies such as Sibneft (NYSE: SBKYY) and Lukoil (NYSE: LUKOY) may be worth looking into.

Finally, there are a number of funds which specialise in Russia. One example is JP Morgan Fleming Russian Securities (LSE: JFR), which was launched three years ago. Some of its biggest holdings are energy companies, though it also has exposure to banks, IT and healthcare businesses.

Russia has probably been one of the most exciting places for investors over the last few years. Since the country's financial crisis in 1998, Russian shares have increased fourteen-fold, which equates to an annual return of over 40%!

However, investing in Russia involves risks that are not generally found in more developed markets. These include rights of private ownership, a legal system that is undergoing reform, and banks which are being overhauled. Other risks include a revision of its tax system and lax accounting practices.

Corruption should not be ignored, either, though President Putin does appear to be taking a tougher stand in his fight against fraud and dishonest practices. That said, investing in Russia is not for the faint-hearted, and your gains could be wiped almost as quickly as they were made.

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