Such market trends could signify that investors are trying to quickly recoup losses from last year, or that they are “simply chasing performance.” The danger in hot foreign bond markets is that, like any market, there’s only so long returns can multiply, and such investments distract from long-term allocations.

Let’s look at the numbers:

“In the first five months of this year, investors poured a net $4.9 billion into diversified emerging-market mutual funds, more than reversing the net $2.6 billion they pulled out in all of 2008, according to Morningstar Inc. In comparison, mutual funds that invest in large U.S. stocks have had outflows of $11.2 billion, following a $52 billion outflow last year. Meanwhile, natural-resources and precious-metals funds combined have had inflows of $7.8 billion so far this year, versus an outflow of $2.1 billion last year. As for junk-bond funds, investors have put in $12.6 billion, after adding $1.2 billion in 2008.”

While venture capital funds may make a business out of high-risk investment, months and years of research and analysis go into these developing investment opportunities. So despite the potential for big returns, it’s still important for any investor to maintain a balanced portfolio.

(The full article is archived here on WSJ.com.)