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If You Buy Only 1 Foreign Market ...

Bill Mann
November 14, 2007

Look, we here at The Motley Fool don't really buy into the "market does this, market does that" hullabaloo. But you'd be daft not to recognize that companies in any market tend to do well when the market does well, and companies in a certain country tend to do well when that country's economy is bubbling.

And man, have the markets bubbled. Returns around the globe have been unbelievable, with markets in Europe, South America, and Asia all scorching to multiyear or even all-time highs. And it's not as if things went up in a straight line. Between May and June 2006, the Indian stock market suddenly shed nearly 30% of its value, with companies like Sify Technologies (Nasdaq: SIFY  ) and Tata Motors leading the retreat. If you ever needed a contrary indicator, this was it: People in India were jumping off bridges.

What came next? The Indian stock market recovered all of its gains by September and currently sits near its all-time high. What's more, it's followed that same pattern twice more since then. Clearly, this can't last, can it?

That depends. Certainly, Brazil, Russia, China, and India have had great runs. India, trading at 26 times earnings, is probably due for a correction. But even though these markets dominate the attention of the wagging-tongue set, they are not even close to being representative of all foreign markets.

Here at the Fool, I run an investing service that specializes in foreign equities. We call it Global Gains, and we launched last November. But I've been focusing on foreign stocks for the entirety of my investing career. I tend to look where other investors don't, and I tread where they fear to do so. After all, some of the worst-performing stock markets in 2006 were in oil-producing countries. Who would have made that bet in 2005, when oil prices surged past $70 per barrel? "International equities" is a huge playground, from mighty telecoms like China Mobile (NYSE: CHL  ) and Nokia (NYSE: NOK  ) to Canada's Barrick G