Welcome to the fifth installment of our weekly fund review, in which we look back at some of the more notable happenings in the fund world over the past week and tell you what it all means for Foolish investors.

Morningstar looks at ETF valuations

Recently, Morningstar looked under the hood of the ETF world to see which funds might be over- or undervalued. Their analysts found that funds focused on larger-cap stocks were cheaper than those focused on small and mid-sized companies. Additionally, funds investing in REITs, oil services, and gold appear to be overpriced, based on the funds’ price-to-fair value ratios, as calculated by Morningstar’s analysts.

None of this news should be surprising to Foolish investors who pay attention to the market. After all, since ETFs are typically just a reflection of what’s going on in the broader market, Morningstar’s findings make sense. Given the run that smaller-cap stocks have enjoyed over the past few years, you would expect that the prices of these stocks have been driven up to a greater extent than those of large-cap stocks. Likewise, we know that real estate and commodities in general have posted high-flying returns of late, so it makes sense that shares of these types of companies would tend to be more expensive in relation to the rest of the market.

So what does this mean for your ETF portfolio? Well, since it makes very little sense for the vast majority of investors to own sector-specific mutual funds or ETFs, I would recommend staying away from ETFs that invest exclusively in REITs, oil, or gold in the first place, so this shouldn’t be a concern. However, I do believe a long-term diversified investor does need exposure to both large-cap and small-cap securities, so make sure you have both. It is very likely, given historical returns, that large caps, especially large-cap growth stocks such as Boeing ( NYSE: BA ) and General Dynamics ( NYSE: GD ). may outperform small-cap stocks looking ahead.

But that doesn’t mean you should back away from small-caps completely. Make sure your portfolio is more heavily weighted to the large-cap space, which is where the greatest emphasis should be for most investors anyway. Just don’t be surprised if small caps start to lag and are unable to repeat their red-hot performance of the past few years. Over the long term, these fluctuations will even out, and that’s the whole point of diversified investing.

Bill Miller wants to go global

Bill Miller is one of the brightest stars in the investment-management universe. Under his stewardship, the flagship Legg Mason Value Trust fund (LMVTX) has racked up an impressive long-term performance track record, including the oft-cited fact that the fund had beaten the S&P 500 benchmark for 15 straight calendar years, from 1991 through 2005, before falling short in 2006.

But I would argue that looking solely at calendar-year performance to judge a manager’s abilities is somewhat arbitrary. At any rate, it appears that Miller, who to this point has focused entirely on domestic stocks, is mulling the idea of creating a fund that has an international-investing mandate. Legg Mason is taking the position that Miller is looking to improve on his current product by expanding his scope. And given the run-up that international markets have experienced since the market trough back in 2003, many managers are now looking internationally for new ideas.

I certainly won’t knock Miller’s prowess at picking stocks for his fund. Value Trust holdings Amazon ( Nasdaq: AMZN ) , Yahoo! ( Nasdaq: YHOO ). and Health Net ( NYSE: HNT ) have done extraordinarily well so far this year. But does it strike anyone else as odd that after the first year in which his fund didn’t beat the S&P 500, he’s now looking to open a global fund?

I think this has more to do with marketing than anything else. I know I’m always hesitant when a manager with no previous experience in international investing decides to expand outside domestic borders. Sure, many domestic stock pickers can translate their success into foreign markets, but I don’t think it’s a given that they will.

So far, Miller has done an admirable job, building quite a reputation for seeking out the best domestic stocks. It would be a shame for him to lose that focus by trying to expand into new markets for the sake of gathering more assets. I wouldn’t necessarily tell anyone to stay away from the new Global Value Trust fund if it does, in fact, come to fruition. But I would remind investors that just because Bill Miller has done a great job in the past investing domestically, it’s not a sure thing that he can repeat that success internationally in the future. I’d like to see a bit of an international track record before I commit my investment dollars.

Undoubtedly, just knowing that Miller is running the fund will be enough to entice many investors, but Foolish investors should look before they leap into this or into any brand-new mutual fund.

Now that you know what’s happening in the world of mutual funds, take the next step and find out which funds represent compelling investments. The Fool’s Champion Funds newsletter service brings that information right to your doorstep. Fool fund expert Shannon Zimmerman shows you how to find the winning funds you’ve been looking for. Start your free 30-day trial today.

Fool contributor Amanda Kish lives in Rochester, N.Y. and does not own shares of any of the companies or funds mentioned herein. Amazon and Yahoo are Stock Advisor recommendations. The Fool has a disclosure policy .