"Eastern Europe is a very special region," says Rytoft, whose fund specializes in countries that were part of the former Soviet bloc as well as in Russia, with some investments elsewhere in Europe. "You have some very old nations there, hundreds of years old. But in an economic sense they're around 15 years old. They are fairly new countries in terms of a market economy."

    Noting that eight more of these nations joined the European Union this year, Rytoft says, " For the first time, you have a group of emerging market countries becoming members of a major trade organization like this. At the same time, a number of them are holding investment-grade ratings, or are about to get it, and are moving to a common currency, the euro.

    "To my mind, this is a special situation," he says. "They're somewhere in the middle of emerging and developed markets. There is a transition or convergence taking place. ... That will probably create a new grouping."

How Much Of A Good Thing?
    The only hard and fast rule financial professionals agree on when discussing how much of an individual portfolio should be allocated to international equities is that they must be tailored to the investor's risk tolerance. Opinions ranged from a low of 2% or 3% for clients who are cautious about international equities, to a high of about a 50%-50% split between foreign and North American stocks.

    "We have no fixed percentage," says Orecchio. "We do a customization for each client. For our average clients it ranges from a smaller amount, about 2% to 3%, to as much as 15%."

    Kaplan says she also has a sliding range, depending on a client's risk tolerance. "It varies by clients, but I would say that for many people it makes sense to have anywhere from 10% to 20% of the portfolio in international holdings. That includes fixed income."

    Krosby says The Hartford has moved away from "that notion that it's a complete" diversifier. "We look at it as making sure that you're allocated across the board. I think it has to be very specific to each client. Some clients just don't feel comfortable having investments overseas, so we say widen their exposure to companies doing business overseas. But I think that 15% to 25% of a portfolio should be allocated to international as a broad rule of thumb, depending on a client's tolerance for anything foreign."

    Rytoft's assessment is near the high end, though several academic studies have supported it. "The U.S. is 54% of global stock market capitalization, so something like 50% in U.S. or North America is probably the right way to do that," he says. "Spread out the remainder, depending on how much risk you're willing to accept, and how much time you have going forward."

    Of that 50% international allocation, he says, about 8% should go into emerging markets. "The longer the range you're looking at, the higher you should go in emerging markets. The correlation factor is important, to have a piece of the portfolio that is less or negatively correlated to the U.S. It depends on your aggressiveness, and the time you have to flow it."

Where Are The Opportunities?
    So what advice should advisors be dispensing to their clients? For one, many professionals are not optimistic that the domestic market will provide significant gains for the foreseeable future.