Keep Shopping Overseas

With the stock market wobbling, many investors are paying more attention to fixed-income investments and reducing international equity exposure.

But it's an excellent time to add international holdings -- provided you understand the risks and content of what you're buying.

Human resources and consulting firm Hewitt Associates reports that 401(k) investors poured about $3.2 billion into international and emerging market equity funds between January 2003 and April 2006. At the end of April, the typical 401(k) account had about 7.93% of its assets in international equity.

However, 401(k) investors began reducing their international exposure in May as the stock market swooned. At the end of June, the typical 401(k) account had only 6.77% invested in international funds and another 0.74% invested in emerging markets -- a decline in total equity exposure to 7.51%, according to Hewitt. During June alone, more than a quarter of a billion dollars of 401(k) money moved out of international and emerging market equity funds -- and most of the net transfers were fixed-income bound. ...