TheStreet.com Ratings: Adjust Your Global Fund View

For the past few years, it's been hard to go wrong investing overseas, as mutual funds and exchange-traded funds that hold foreign stocks have consistently outperformed their domestic counterparts. That's likely to be the case again this year, but given the uncertainty about U.S. interest rate outlook, we believe the prudent investor may want to move some money out of volatile emerging markets and into Europe.

The average top-rated international stock mutual fund (B-minus and above) returned 26.7% in 2006 and has risen an annualized 20.18% for the three years ended Dec. 31, compared with the top-rated domestic stock funds, which returned 19.11% on average last year, and an annualized 14.75% over the past three years.

The story is much the same for ETFs, which resemble index-oriented mutual funds but trade throughout the day on an exchange, like stocks. Our top-rated international stock ETFs returned 35.5% in 2006, compared with 19.59% for domestic stock ETFs, and have returned an annualized 13.27% over the past three years, compared with 5.5% for domestic stock ETFs. ...