May 23 (Bloomberg) -- The storm that has lately hit stocks around the world didn't come out of a clear blue sky.

Surging commodity markets gave a hard-to-miss signal of increasing turbulence -- and that wasn't all. Warning clouds had also been discernible for months in simple data on the money going into mutual funds for U.S. investors.

In the first quarter of 2006, according to the consulting firm of Financial Research Corp. in Boston, investors poured $71 billion into shares of international and global funds. That represented two-thirds of the $105 billion in inflows to all long-term stock and bond funds, including exchange-traded funds.

To call that a trend is putting it mildly. Two of every three new dollars of late has gone into international funds, which own securities from markets outside the U.S., and global funds, which typically have both U.S. and non-U.S. holdings. The first-quarter percentage of 68 percent, by my reckoning, represented an increase from 62 percent in all of 2005 and 40 percent in 2004.

In other words, U.S. fund buyers, who have long been told they were underinvested in other markets around the world, have become increasingly intent on catching up.

Better late than never, right? Over the last five years, more than 350 international and global stock funds tracked by Bloomberg averaged an annual gain of 8.6 percent through the end of last week. That more than doubled the 3 percent-per-year advance of domestic growth and value stock funds.

Party Time

Well, ``better never than late'' is sometimes the wiser precept in investing, where the last to arrive at the party risk missing the fun and yet sharing in the hangover. As with many other preparations served up at parties, the big question about worldwide funds sooner or later becomes how much is too much.

One concern is that markets elsewhere may actually be more vulnerable than American stocks to whatever threat may be posed by rising U.S. interest rates. Sure enough, in the past month through last week an average of 88 emerging-markets stock funds tracked by Bloomberg lost 6.1 percent while domestic growth and value funds declined 4.2 percent.

In FRC's tables, assets of international and global funds reached $1.3 trillion as of the end of March. That's just a shade under 20 percent of the $6.7 trillion in long-term funds of all types.

Looks like a reasonably conservative allocation, judging by the rough rule of thumb that two-thirds of the world's economy lies outside the U.S. It may seem even more conservative to those who figure the strongest sustained future growth will come in places such as China, India, Latin America and Eastern Europe.

Room to Grow

``Higher inflation, higher personal and corporate taxes, and a lower dollar point U.S. and global investors away from U.S. assets and toward more competitive economies,'' argues Bill Gross, manager of the world's biggest bond fund and chief investment officer at Pacific Investment Management Co., in his monthly Pimco commentary for May.

Whatever one may think about the economic outlook, though, experience teaches that concentrated flows of mutual-fund money often raise warning flags.

A glance back though Investment Company Institute figures reminds us that demand for stock funds of all types climbed to record highs in early 2000, just before a fierce bear market set in. The chart veered to extreme outflows around mid-2002, just as that bear market was getting ready to bottom out.

No blanket indictment of fund investors is intended here. Flows occur at the margin; the great majority of fund owners hung tight through the wrenching ups and downs of the late 1990s and early 2000s.

Rocking the Boat

The payoff for anyone willing to stay aboard from the end of 1995 through the end of 2005 was a 9 percent annual return, as measured by the Standard & Poor's 500 Index. That's right around the historic norm, and nice money if you can get it. The catch is, to earn that kind of long-term payoff you usually have to ride out some inclement weather along the way.

Most fund investors have shown an ability to stay calm and patient through good times and bad. But any time the flow of new fund money becomes a torrent, the calm and patient may want to stand back for a little while.

(Commentary. Chet Currier is a Bloomberg News columnist. His opinions are his own.)

To contact the writer of this column: Chet Currier in Los Angeles ccurrier@bloomberg.net.

Last Updated: May 23, 2006 00:19 EDT