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Are You Russian To Make Some Money In The Stock Market?

- Alan Lavine and Gail Liberman

Some financial advisers say Russian stocks might be ripe, assuming you are willing to risk big losses.

Elliot H. Gue, associate editor of Personal Finance, a McLean, Va.-based newsletter, says commodity-rich countries, like Russia, should do well in the near future. Russia has massive amounts of oil and gas reserves. Oil and gas make up 70 percent of Russia's market index.

Gue says that the Russian economy is growing at a healthy clip. It was up 7 percent in 2003 due to higher oil prices and a 12 percent increase in oil exports. As a result, the Russian Central Bank increased its foreign exchange reserves. And there's been strong growth in the formation of private businesses. Private sector credit growth makes up 70 percent of Russian economic growth.

Despite the good news, Gue says investing in Russian stocks is risky business. So if you invest, it's best to have a buy-and-sell game plan.

"Russia is an emerging market and remains volatile," he says. "Investing there requires patience and a strong stomach."

Gue recommends "American Depository Receipts (ADR), or foreign stocks traded in U.S. dollars on a U.S. stock exchange. His picks include:ye Lukoil, Russia's largest oil company. ExxonMobil is the only company that has more oil reserves than Lukoil.

  • Wimm-Bill-Dann, which gets most of its revenues from the sale of milk and orange juice. The company's revenues are up 23 percent over the past year with milk revenues up 32 percent.

  • VimpelCom, Russia's second largest mobile phone company and one of Russia's fastest growing businesses. The company's network covers 90 percent of Russia's population.

    Want more diversification? Gue recommends the Central European Equity Fund, a closed-end fund that trades on a U.S. stock exchange. The fund invests in a wide range of Russian and Eastern European industries. Closed-end funds sell a fixed number of shares that are traded on a stock exchange. When you own a closed-end fund, you essentially are a stockholder in a company that manages a basket of stocks.

    You must buy a closed-end fund through a stockbroker, and pay a brokerage commission when you buy or sell it.

    Your other option is to invest in mutual funds that invest in Eastern European stocks. The best-performing funds in this group, according to Morningstar Inc., Chicago, include the Vontobel Eastern European Equity Fund, U.S. Global Investors Eastern Europe Fund and ING Russia Fund. Respectively, they were up 29 percent; 39 percent and 37 percent annually over the past three years ending in June, Morningstar reports.


    Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books). Al and Gail's new book is Rags to Retirement, (Alpha Books).

    To read more columns, please visit the column archive.

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