Is the risk worth the potential reward when it comes to investment in Russia and its exchange traded fund (ETF)?

Russia has become a leader in Eastern Europe, and living standards there have vastly improved, according to a report from Research and Markets. Its increasing market size has been attracting increasing interest from foreign investors.

With a growth rate of 8% for 2007-08, Russia appears to have a lot going for it: vast energy, mineral and timber reserves, giving it the qualities that investors admire, reports Zoe Van Schyndel for The Motley Fool.

Market Vectors Russia Fund (RSX) also makes it easy to access Russian companies that are inaccessible on any U.S. exchange. The latest commodities boom has influenced the performance of RSX, with 40% invested in oil and gas and another 22% given to the iron and steel sector. The downside, though, is that the fund is heavily influenced by political events – something to which Russia hasn’t been a stranger lately.

Does RSX have staying power? Russia is heavily dependent on exports of natural resources. Although Russia has a reputation as corrupt, it is still tightly plugged in to global financial and commercial networks, and the country has embraced globalization.

Russia is entwined in global financial and commercial networks, and is expected to be a staple of the global economy, report David B. Rivkin and Carlos Ramos-Mrosovsky for The Washington Post.

But will Russia play nice? Its ETF and economy will depend upon it in the long run, because it has too much to lose by alienating itself. Year-to-date, it’s down 23.8%.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.