International Funds?

Question

I live in the US, and most of my money has been in Internation Funds, as they have done really well the last few years. These funds invest mostly overseas, in growing economies like Europe, Africa, Russia..

Will a possible recesssion looming in 2008, I wonder if it's wise to remain in these funds, so they invest outside the US. Or if these funds have an equal or greater chance of crashing. I understand no one can truely predict it, but any somewhat professional responses and feedback are appreciated.

Answer 1

These funds will inevitably be affected by a US Recession. A lot of these funds, while they invest internationally, are domestic US Stocks. These are stocks with their business focused outside the US though. So, I would wager Caterpillar is in your fund. Caterpillar is obviously in high demand since there are so many emerging markets that are needing to build an infrastructure to maintain their growth...this means increases in contruction.
Does this mean a US recession will take Caterpillar. No. And if it did, you have about 500 other stocks that will be doing their share to keep the fund afloat.
Moreover, the situation facing the US is also facing the EU and the UK. It has already had an impact in China and Canada. With all of this going on, there is a slight chance of a Global recession. Maybe not all at once (meaning it may develop in little pockets) but its something to consider as well. People are gonna throw the word 'diversify' at you in an attempt to sound intelligent...don't listen to them. Investing in funds means you are diversified. The diversification you are looking for is more specific, you want to limit your exposure to the possible effects of a US recession. For that, you seem to be doing fine with the International Funds...
BUT, my next, very important, question is this: WHAT international funds are you investing in?

Answer 2

Always diversify - figure out an appropriate allocation between domestic and international equities and fixed income funds, then stick to it.

Answer 3

There is only one answer;

"Asset Allocation".

You can choose to overweight at times (by a little).
"Asset Allocation' is because "no one can truely predict".