If you are going to invest outside the U.S., you should build a diversified portfolio, as you would for your U.S. stocks. Ideally, you’d have three core international funds and perhaps another fund to play a hunch.
Your international stock fund portfolio should be anchored by a well-established fund that invests in blue-chip companies from all over the world.
To complement this type of large-company international fund, you might also invest in an international fund that holds small and medium-sized companies.
Rather than add a small- or mid-cap international fund, you might add a fund that follows a certain style. In 2001, the only diversified international funds that had positive returns were value funds such as Longleaf Partners International, First Eagle SoGen Overseas, and Oakmark International Small Cap Fund.
Once you have, say, three broadly diversified funds with different investment styles, you might play a hunch with a fairly small amount of money. For example, if you think Asian markets will rebound and outperform the rest of the world, you can add a fund that invests only in Asia. If your hunch is that a particular country is set to be the leader, you might buy a closed-end single-country fund that trades on an exchange so it can be bought and sold like a stock.
