International investments increase your level of diversification across industries — always a primary goal. For example, new breakthroughs in technology that produce the next Microsoft may well come in Asia. But the increasingly correlated returns in various markets mean that allocating part of your equity portfolio internationally doesn't provide quite as much opportunity to capitalize on strong performance in other stock markets when the U.S. markets are in a slump. It worked that way once, but it doesn't any more.
A stronger approach to international diversification may be to concentrate on what may happen with currency exchange rates.
That is, if the U.S. dollar becomes even less valuable than it has been in the recent past, the value of U.S. investments abroad will increase. The greatest opportunity for gain, in this situation, is investing in a growing emerging economy with an expanding population that uses a currency other than dollars. That way, positive returns would get an additional boost when converted to U.S. dollars.
But you must also weigh the potential downside: Exchange rates could swing in the other direction, reducing the value of your investment.
Jeffrey Rosensweig, Goizueta Business School, Emory University
Jeffrey Rosensweig, Goizueta Business School, Emory University 
