When you invest internationally, currencies can be a source of profit or a source of pain. Too many investors venture beyond the U.S. without properly evaluating their currency exposure. International investment without proper currency evaluation is akin to crossing the street and only looking one way: You could get blindsided by a bus.

When Argentina revalued its currency in 2002, U.S. investors owning stocks in Argentina took a lashing of more than 50%. Citizens of Argentina, however, enjoyed an 80% gain on their investment. Developing countries are not the only countries susceptible to large currency fluctuations. In the late 1990s, the depreciation of the Australian dollar against the U.S. dollar turned a 60% return on Australian stocks into a 7% return for U.S. investors owning Australian stocks.

Just as a depreciating currency can zap the pizzazz out of an otherwise good investment idea, an appreciating currency can turn a good investment idea into a great investment idea. Take the U.K., for example. Since year-end 2002, the U.K. stock market is up 64%, but U.S. investors are up 104% in the same stocks over the same time period. An appreciating pound added another 40% to the returns of U.S. investors. The opportunity in currency investment is too important to ignore.