Dollar appreciates 15% vs. yen, euro in 2005

This headline about dollar appreciation reminds me that it's so difficult to forecast what'll happen in the markets and economy. Even over a period as short as one year.

One year ago, pundits were predicting the dollar would fall in value vs. the world's major currencies. Instead, the opposite happened.

However, if you followed the pundits' advice to invest in international stocks, you still would have been a winner last year. As measured by the MSCI EAFE index, international stocks were up by almost 11% in U.S. dollars, for the period Jan. 1- Dec. 30, 2005.

You could have earned even more, if you invested in an international fund that hedged away the influence of exchange rates. Over the same period in 2005, the MSCI EAFE index rose more than 25% as measured in local currencies. Quite a difference.