NEW YORK (CNN/Money) - How much of my portfolio should be invested in international stock funds, assuming a long investment horizon (I'm 25 years old)? And how do I choose a good international fund?

-- Richard Larson, Santa Clara, Calif.

I can't give you a single "correct" percentage of assets you should have tucked away in international stock funds. But I can give you a reasonable range. Before I do that, however, let me give a brief synopsis of the rationale for putting a portion of your portfolio in international funds so that the xenophobes among us might also consider investing a portion of their money "over there."

For years, investment publications told individual investors that there were two benefits to diversifying with foreign securities. The first is that international funds could boost the return you earn. The second benefit is that adding foreign funds to a U.S. portfolio could reduce the riskiness, or volatility, of your portfolio overall.

This isn't because foreign stocks are less volatile than U.S. stocks. They're not. In fact, they tend to be more volatile. But they do have relatively low correlations with U.S. stocks, which is a fancy way of saying that they don't zig and zag in unison with U.S. shares. Because of this relatively low correlation, the foreign stocks add a bit of ballast to a U.S. portfolio, thus making the portfolio overall less jumpy than if it had U.S. stocks alone.

Lately, however, some investment pros have begun to question this. On the return side, it's been clear that over the past decade or so, the U.S. market has beaten foreign markets overall, in many years by a wide margin.

As for the risk-reducing effect of the low correlation of foreign stocks with U.S. securities, well, that's also been challenged of late. Some analysts point out that correlations between U.S. and foreign stocks have risen the past few years as the world has become less local and more global. As a result, markets have begun to move together in response to larger trends that affect all companies within a given industry, regardless of where they're located.

So what do I say? Well, on the issue of returns, I say returns between different parts of the world are always going to seesaw, and that it's impossible to predict the swings. So I don't think it makes any more sense to avoid foreign stocks because their returns have been lower over the past decade or so.

As for whether the correlation between U.S. and foreign stocks is becoming tighter as a result of countries' increasingly global outlook, I say it's too early too tell what the effect will be. Fact is, correlations between U.S. stocks and foreign shares have tightened before, and then dropped again.

So for long-term investors, I still believe adding some foreign shares can reduce the volatility of your portfolio. That doesn't mean that your foreign holdings won't get decimated along with U.S. shares during market crises and meltdowns. But foreign shares have never offered that kind of protection, so that shouldn't be your reason for buying them. The volatility-lowering benefits of foreign diversification occur on a more regular basis and over long periods of time. You shouldn't think of adding foreign shares as some sort of protection against market crashes.

Okay, now that we've got all that out of the way, how much of your portfolio should you invest in foreign stock funds? Generally, the recommendations you'll hear vary from a low of about 5 percent to a high of about 30 percent.

My feeling is that if you're only going to do 5 percent, you're not going to get much of a diversification benefit, so why bother? I'd make 10 percent of assets the low end of the range. And once you start going beyond 15 to 20 percent, you don't get much of a gain in volatility reduction. So I put the range between 10 and 20 percent, maybe 25 percent tops.

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I'd make a broadly diversified international fund my core holding -- that is, a fund that spreads its assets pretty much around all regions of the globe rather than concentrating in one country or region. To get a bit more diversification benefit, you might also consider putting a bit of your foreign stake into a fund that specializes in small-cap international issues, because smaller foreign stocks are more likely to be driven by local rather than global trends.

Finally, if you don't mind taking a bit more risk in search of higher returns, you might make an emerging market foreign fund a part of your foreign allocation. Emerging market funds can give a real white-knuckle roller-coaster ride, however, so don't even think of this option if you're bothered by the idea of seeing your fund drop 30 percent or more in value over the course of a year.

As for picking a foreign fund, I'd say the same rules pretty much apply to those for picking a U.S. fund. I'd want a fund that's had competitive returns the past five years or longer on a risk-adjusted basis compared with its peers. I'd want a fund that has a coherent investment strategy and seems to stick with it. I'd want a fund with expenses that are about average or below-average for its category.

You can begin your search for funds that meet such criteria by going to our Fund Screener. Once you've narrowed down your list of candidates to a manageable number -- say, five to 10 -- I'd suggest you check them out in more detail by going to Morningstar.com, where you'll find more detailed stats. Bon chance!

Walter Updegrave is the author of Investing for the Financially Challenged and can be seen regularly Monday mornings at 8:40 am on CNNfn.