By Mark Balasa,
Balasa Dinverno & Foltz LLC

The wave of new cash into the international products has spurred competition and innovation.This can be a good thing or a bad thing.Innovation that results in meaningful new tools is a good thing.Innovation that results in gimmicky products that allow investors to indulge in hot trends or meaningless cross sections of a market are a bad thing.

Currently, there is a flurry of activity around the creation of new indexes. Russell announced a major international expansion of their index line, sketching out plans to launch global and country-specific indexes. These new indexes will offer a set of country, region, and industry benchmarks, covering small-cap and large-cap companies in developed and emerging markets.The indexes will cover approximately 10,000 stocks in 63 countries and 22 regions.

MSCI has also unveiled new plans.For one, MSCI is targeting a major expansion of its popular All- Country World Index (ACWI). When complete, the new ACWI will include all investable large and mid-cap stocks worldwide.Instead of covering only a sampled majority of the stocks across the globe, it will cover approximately 98 percent of the market cap of large and mid cap companies.MSCI will also introduce large and mid-cap ACWI subindexes.

In addition, MSCI will expand its global small-cap index to include emerging markets.This is a change as in the past it only focused on the developed world. They plan to also develop growth and value versions of the small-cap index.

Finally, MSCI will combine the ACWI with the new small-cap index to create a new, comprehensive, global benchmark. The final methodology and details of the index transition process will be announced shortly.

Dow Jones Wilshire joined in by launching its global index family in October of 2006, with the simultaneous rollout of a complete set of size, industry, regional, and country indexes.These indexes cover 56 countries around the world and are float-adjusted.

International Investors Can Better Manage Their Portfolios

These new indexes will help investors in a couple of important ways.

First, it will provide everyone far better benchmarks with which to evaluate portfolio managers as the indexes are much more robust and inclusive.

Secondly, these new indexes will give ETF and other product providers new tools to build products around.This will give the average investor a more transparent and lower cost way of accessing the various components of the international markets.However it will also increase the risk for investors that don't understand the drivers of risk and return.

Updated research shows that some of the basic tenants of where return and diversification benefits come from remain largely unchanged.International small company stocks and international value stocks are great additions to a portfolio.Yet, how you implement these ideas and the precision with which you can implement them has become dramatically more varied and sophisticated.

With the weakening U.S. dollar along with the relative decrease in the United States' importance to the world markets, these developments become very relevant to U.S. investors.Staying current will allow your portfolio to take advantage of the ideas and opportunities that our global equity markets are creating.

* Mark Balasa, CPA, CFP and, Principal, Balasa Dinverno & Foltz LLC,. Mark has written for the Journal of Retirement Planning and has been quoted in Barron's, Business Week and other major publications.