After a long period of moribund performance, international stocks are on the mend. It is a mistake for investors to shun international holdings because they are an important ingredient to successful investing despite periods of underperformance. Here are two tips on making the most of your foreign holdings: 

• Diversify your foreign stock holdings. There are three different kinds of international stocks to consider. First are the stocks of large companies that trade in developed countries, like Great Britain, France, and Australia. Most garden-variety international stock mutual funds and ETFs invest in these stocks. Second are the stocks of emerging countries like South Korea, India, and Brazil. You can own a piece of this action with an “emerging markets” stock fund. Third are stocks of small companies based overseas that can be owned through an international small-cap fund.
  

• Avoid single-country or single-region international funds. Many investors are attracted to single country (China, for example) or single region (Latin America, for example) foreign stock funds. Perhaps they’ve read a news report about an economic boom in a particular country or region. Or one of those funds just turned in a spectacular quarterly or annual performance. To avoid concentrated exposure investors should avoid single-country or single-region funds. Investing in a narrow foreign market is too risky for most. A) we’re not very good at identifying the most promising foreign markets, and B) by the time we get in, it’s probably too late. Instead, let the manager of a good garden-variety international mutual fund decide which countries and regions are the best places for your money. Most international stock fund managers are supported by analysts located throughout the world, so they have a big advantage over our uninformed intuition. Or if you prefer to cast a wide net of foreign stocks, invest in international stock index funds or exchange-traded funds (ETFs).