Dan Wiener, editor of The Independent Advisor for Vanguard Investors, finds several Vanguard funds that offer good ways to play international markets.

A year ago, foreign markets were on a tear alongside our own markets, finishing up more than a half-decade of outperformance.  My, how the world turns!

Today, while the five-year numbers still favor the foreign fund, the last 12 months have been brutal as Vanguard S&P 500 Index has fallen 22.0%, Vanguard Total Stock Market Index has declined 21.2%, and Vanguard Total International Index has cratered 30.1%.

Is now really a good time to be invested in foreign stock markets? My answer is yes, absolutely.

According to investment research firm Global Insight, about 76% of the world's GDP is generated outside of the United States. In other words, if you have a US-only portfolio, you are limiting yourself to investments in companies that produce less than one quarter of the world's economic output. Moreover, the US share of global economic growth is expected to continue to decline.

The US economy remains a vibrant growth engine. But while the US economy will continue to grow, it isn't expected to keep pace with the growth rate of many other countries, especially those that are in the early stages of transitioning into modern industrialized economies. To gain exposure to the highest-growth opportunities in the world requires adding a sizable foreign stake to your existing US-dominated investment portfolio.

I believe investors with a long-term growth perspective are best served by investing anywhere from 20% to 40% of their portfolio in foreign stocks depending on their risk tolerance and investment time horizons, as well as the state of the global economy.

Between original manager Marathon Asset Management, quantitative manager Acadian Asset Management and AllianceBernstein, Vanguard Global Equity's (VHGEX) funds portfolio blossomed. With the April addition of Baillie Gifford, it's becoming more unwieldy.

The portfolio has bloomed from 300 to 800 or so stocks. While I'm still a believer in this fund's value-oriented global approach, it's now got some competition in the new Vanguard Total World Stock Index (VTWIX), which allocates assets on about the same level: 40% in the US and 60% overseas. Historically, Global Equity has outperformed the index fund's bogey, though recent performance has reversed course.

Vanguard International Growth (VWIGX) was the top-ranked fund in my October 2007 "Hot Hands"analysis. I always considered this fund's former lead manager Richard Foulkes one of the best of the breed among international investors. Since [his retirement] in October 2005, Virginie Maisonneuve and International Explorer's Matthew Dobbs have taken over Foulkes' approximately 50% portion of this $16.8 billion portfolio.

The fund has three managers, with Baillie Gifford handling about 40% of assets and M&G Investment Management handling about 5% or so. The portfolio hasn’t blossomed to hold hundreds of stocks—it currently has about 170 or so, and the top ten represent better than 15% of assets. With growth stocks presenting some decent opportunities, this fund is a good option as a core foreign holding.

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