Although last spring's correction roiled foreign markets, there is a strong case for keeping foreign stocks in your investment mix. For one thing, the long-term trend for the dollar is almost certainly down because of the nation's yawning trade and budget deficits.

Dan Fuss, the ace bond manager at Loomis Sayles, says he thinks that, over the long term, expanding budget deficits will drive up inflation and cheapen U.S. currency. Buying foreign stocks is one way to take advantage of the falling dollar because money you invest in yen, euros and the like gets translated back into more greenbacks.

But depreciating currency is only one reason you need foreign stocks. Many of the best companies in the world, with the best growth prospects, are based abroad. The Wharton School's Jeremy Siegel, author of "The Future for Investors" (and a Kiplinger's columnist), recommends that U.S. investors place 20 percent to 40 percent of their stock holdings in foreign names.

Still, it would be wise to trim holdings in emerging markets and substitute funds that focus on developed markets, such as Dodge & Cox International Stock and Oakmark International.

In foreign or U.S. investments, we don't believe you should try to time the markets. Instead, base your plan primarily on your risk tolerance and time horizon, and stick to such time-tested principles as diversification and rebalancing.

If you've been lazy and have let your winning funds ride, now is a good time to rebalance to your target allocations. But it also makes sense to tinker with your portfolio on the margins to reflect the current — and expected — environment. For instance, you might move some money from small-cap funds to ones that invest mostly in large companies, such as Marsico Growth and T. Rowe Price Equity-Income.

It may also be a good time to add to your holdings in short- to medium-term bond funds, such as Harbor Bond and Fidelity Floating Rate High Income. In a paradox of fixed-income investing, bond returns deteriorate as yields rise, but bonds become more attractive because they pay more (bond prices move inversely with yields). Bond funds should even out portfolio volatility and help you sleep at night.

The risky stuff was fun while it lasted, but now it's back to basics.