Would you ever consider putting your hard-earned investment dollars in a place like Nigeria or Kenya? It’s a question that strikes at the heart of an investor’s risk tolerance. 

But how you answer it may be a key factor in determining whether you have what it takes to capture truly outsize gains in the stock market.

While many people would stay up at night worrying about that kind of an investment, others look at opportunities in far-flung places and see vast and seemingly limitless potential.

These up-and-coming countries, or “frontier markets,” tend to be smaller and less developed than emerging markets like China and India. And while they don’t get the same kind of media coverage as these countries, the growth potential is staggering.

Many frontier markets are posting astonishing economic growth of 7% to 14% per year. As these economies grow and consumers become wealthier, these markets will present incredible opportunities for investors. 

Some of these nations have lagged behind the developed world for centuries and have been unable to mount anything like the fast rate of growth in other developing markets. Frontier markets usually have a poor population willing to work to thrust itself into a middle class, and, with luck, they also have access to a deep cache of natural resources and an appetite for export dollars.

Just take a look at some of the results so far from two of my favorite frontier markets.

In the last quarter of 2012, Nigeria’s economy grew about 7%. The growth story continued in Kenya. This East African nation’s forecasts call for 5.8% growth per year from now through 2020, and then for growth to jump even higher, to 6.8% through 2030. 

These high growth rates have led to solid market results so far. The Nairobi Securities Exchange Index in Kenya returned 57% in the past 12 months. The S&P 500, meanwhile, returned 18%. During that same period, the Nigerian Stock Exchange All Share Index advanced 56%.

Frontier-market investing, which has been gaining interest, is likely to continue to roll like a juggernaut. More investment companies will create products like exchange-traded funds (ETFs) that simplify access to these growing markets and help manage risk. Brokerages will allow investors to participate in more foreign exchanges, and more foreign companies will list their securities in the United States.

Two things will fuel the trend toward the development of frontier markets. The first is the development of a middle class, a group of consumers no longer concerned with mere subsistence, but rather with bringing in real discretionary income that can be used to raise their standard of living. That is typically followed by meaningful growth in high-profit services that create additional wealth. 

This trend must be accompanied by a sustained, meaningful push for democratically centered political stability. Foreign dollars simply don’t flow to countries where investors worry their property will be confiscated by a corrupt junta. 

Those two trends have to happen simultaneously. And the good news is that they are happening and have been happening in many frontier-market countries for years. 

As that continues to take place, investors — growing increasingly tired of the tepid and sometimes negative returns from mature markets — are seeking greener pastures. And in the digital age, they will leave no stone unturned in their search for the market’s next great growth story.

Surprisingly, the more isolated these fledgling economies are from the debt-laden problems in Europe or the United States, the better. The less exposure these countries have to a global event like the recent financial crisis, the greater the appeal. 

The ideal model, I think, is Nigeria. The African nation is blessed with astoundingly rich natural resources, particularly oil. And while for years the oil infrastructure there was a target for disaffected and disenfranchised citizens who demanded a greater share of the proceeds from the nation’s oil, that chapter has been closed and followed by a number of moves toward democracy.

The result has been nothing short of spectacular. Its economy is expected to grow by 7.1% this year. And most of that growth was derived outside of the booming oil sector. Economic reports, in fact, bear out the notion that the Nigerian middle class is beginning to spend to raise its standard of living. 

My favorite exchange-traded fund that gives investors exposure to Nigeria is the Market Vectors Africa ETF (NYSE: AFK). The fund trades on the New York Stock Exchange and casts a wide net over the African continent, with 25% invested in Nigeria. Its holdings include some of Africa’s largest banks, telecoms and natural resource firms.

Of course, investing in an emerging fund like the Market Vectors Africa ETF is risky. Political unrest or a crash in oil prices are two very real possibilities that could lead to slow or even negative growth. 

With that said, this fund offers easy exposure to a variety of markets that have long been out of reach for the individual investor. And with growth in the U.S. expected to be less than 2% this year, you’d be wise to face your aversion to risk head-on and invest just a modest portion of your portfolio in frontier markets.

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