If pressed, could you tell me the country that offered the best stock returns over the past 12 months? It's harder than you probably think, because (1) the last 12 months have been a brutal time to be an investor, and (2) it's not any of the countries you might expect.

You call that a market?
American investors are suffering this year. The S&P 500 is down more than 37% over the past year. That's abysmal … and it's even more abysmal than some other global markets.

Without further ado, the top five performers:













Source: Motley Fool Global Gains research.

This list is incredible to me for a couple of reasons. First, it's been such a bad year that there are just two markets in the entire world with positive returns. Hopefully, that makes you feel a little better about your own returns. Second, the list of countries here is unexpected. Oman? Bangladesh?

We can learn a few things from this. First, if you're an American investor, it's absolutely crucial to be invested abroad. The returns of individual markets can offer needed diversification. Second, the best returns can come from obscure places -- not from the countries we read about every day in the papers. Finally, there is some risk involved in investing internationally. For example, because of regional instability, you certainly wouldn't want to be entirely invested in any one of these countries.

Buy what others aren't
The main lesson here is old hat: To get the best returns, you need to be willing (and able) to look where other investors aren't. That's why the best domestic stocks of the past 10 years were all small caps.

See, huge numbers of investors and analysts watch large companies and popular markets. Hewlett-Packard (NYSE:HPQ), Verizon (NYSE:VZ), and Nokia (NYSE:NOK), for example, get coverage from 25 or more analysts. Those three popular stocks also have more than 2,000 active ratings in our Motley Fool CAPS community intelligence database.

In other words, they're probably pretty efficiently priced.

You'll get the best returns, however, by finding market inefficiencies. And while another 2,000 investors are covering Deere (NYSE:DE), Chesapeake Energy (NYSE:CHK), and EMC (NYSE:EMC), there's not a single Omani listing in the system!

The Foolish bottom line
That's where your opportunity lies as a Foolish investor. But as I said, international investing is not without risks. If you'd like some help finding worthy international investing ideas that you may never have heard of, click here to try our Global Gains service free for 30 days. You'll also enjoy immediate access to our handy asset allocation guidebook.

There is no obligation to subscribe, and our team recently returned from a research trip to Mexico with two top-notch stock ideas for Global Gains members.

This article was originally published on Dec. 13, 2006 as "The 10 Best Places to Invest." It has been updated.

Tim Hanson does not own shares of any company mentioned. Nokia and Chesapeake Energy are Motley Fool Inside Value choices. No Fool is too cool for disclosure.