There’s nothing like being burned by an investment, and those with money in emerging market stocks learned about it the hard way in 2011. As a group, emerging markets plunged nearly 19%, making them one of the worst-performing asset classes last year.

By no means should investors take this as a signal to avoid emerging markets, though. I firmly believe emerging markets will provide by far the best returns in coming years. They’re already making an impressive comeback in 2012, jumping more than 14%, compared with about a 7% gain for the S&P 500.

However, there are individual emerging markets I think should be avoided because they’re just not worth the risk. Markets like these are typically extremely volatile, even by emerging markets standards, and they can underperform, go nowhere or even lose you money for years on end. It can be difficult to escape them entirely, because most diversified emerging market mutual funds and exchange-traded funds (ETFs) provide at least some degree of exposure. So you probably don’t want to make matters worse by owning funds or ETFs devoted specifically to these high-risk, low-return developing countries.

I say this with a particular country in mind: Russia.

I speak from harsh experience.  Until very recently, I owned shares of one of the top Russia-focused funds, Templeton Russia & Eastern European Fund (NYSE: TRF), a closed-end mutual fund that usually devotes about 75% of assets to Russia and the rest to other countries of Eastern Europe such as Kazakhstan, Cyprus and the Ukraine. The fund was in the top 1% of its category for the time period I owned it (the past 15 years), so I know I couldn’t have made a better choice. Still, long-term returns were relatively meager and not worth the wild ride, in my opinion. And mind you, this is one of the best Russia-focused funds, let alone a mediocre or poor one.

During the past 15 years, the fund delivered total returns of about 8% per year, which is what you might have hoped for from a much more conservative investment. And consider what shareholders had to endure to get that 8%, especially in 2008, when all hell was breaking loose in the financial sector. That year, the fund dropped 78%, more than twice the 37% the S&P 500 lost. This sort of outrageous volatility is typical of Russia, and it’s just one reason to minimize your exposure.

Here are several others…

Corruption. Though it has been two decades since the fall of the USSR and the birth of Eastern Europe’s market economy, the region still has a reputation for rampant corruption. Peter Loukianoff, an investor with Russian venture capital firm Almaz Capital Partners, for example, recently reported that extortion of Russian business owners is still common and often occurs as demands for tax payments by people claiming to be with a public service. Loukianoff said he knows of cases in which as much as 40% of profits go for these so-called taxes.

In the beverage industry, it’s estimated that 46% of the vodka sold in Russia is produced by companies that are not paying taxes, which gives these companies an unfair advantage over foreign brands and competitors who pay taxes.

Russia is also doing a poor job of protecting business property rights. In the clothing industry, for example, an estimated 25% of products are counterfeits produced more cheaply but sold under an existing brand. According to Bill Browder of Hermitage Capital, one of the first and biggest foreign investors in Russia, accepting bribes and other forms of corruption that create an uneven playing field for businesses are common even at the highest levels of government.

Overreliance on Commodities. One reason Russia suffered so badly during the global financial crisis is so much of its economy — 40-45% of gross domestic product (GDP) — consists of exports of oil and gas, which can be wickedly volatile in price. Oil, for instance, fell from about $145 to $30 a barrel between July and December 2008, nearly an 80% decline in only a five-month period.

This prompted Russian leaders to start better diversifying the economy into other areas, like technology. One goal, for example, is to build a $30 billion nanotechnology industry by 2015. I’m skeptical, though, because Russia is considered a very tech-unfriendly country. And, rising energy prices (oil has been back to around $100 a barrel for a while now) may undermine the will to change, just like cheaper energy prices helped sap the United States’ motivation to develop alternative fuel sources during the past couple decades.

Lack of Transparency. Russian companies aren’t typically very shareholder-friendly in that they don’t disclose nearly as much information about their finances, business practices or ownership structure as their counterparts in Western Europe and the United States. This makes it a lot more difficult to determine how much their shares are actually worth, calling into question the accuracy of the prices of publicly-traded Russian stocks.

In addition to the problems I’ve already mentioned, there’s also the issue of the Russian government having a lot more power over partially or fully state-owned companies than foreign investors may realize. Thus, it’s much easier for the government to step in and influence investing, borrowing and strategic decision-making.

Action to Take –> Although Russia’s market economy showed great promise when it began to emerge two decades ago, it hasn’t lived up to its potential by a long shot. I doubt it ever will. Sure, Russian stocks have provided some unbelievable returns in relatively short periods of a few months to several years, but long-term performance doesn’t justify the extreme risk and volatility of these stocks.

I suggest completely avoiding Russian stocks and Russia-focused funds and ETFs. You can get more than enough exposure to the region through a diversified emerging markets fund or ETF.