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If your international investments are lagging while U.S. markets rise, first check what you own, how the comparison was measured, and whether your portfolio still matches your long-term plan. A recent performance gap alone does not show which market will lead next. For a U.S.-based investor, exchange rates can also make a foreign investment’s return in dollars look very different from its return in local currency.
Why international investments can fall while U.S. markets rise
Different regions take turns leading
U.S. and non-U.S. markets do not move in lockstep. A period in which U.S. equities outperform international equities is a comparison of what has happened over those dates, not a forecast of what will happen next. In a 2025 illustration, Vanguard showed that $100 invested in U.S. equities grew to $334 over the ten years ending December 31, 2024, while $100 in non-U.S. equities grew to $160. Vanguard based the example on relevant MSCI indexes and Bloomberg historical stock data; index performance is not directly investable, and past performance does not guarantee future results. Vanguard’s global diversification discussion also illustrates how narrowing a portfolio after recent winners can mean missing later leaders.
The dollar can change your result
If you are measuring returns in U.S. dollars, your result reflects both the performance of the underlying foreign holdings in their local currencies and movements in exchange rates. A market can rise in its home currency yet be worth less to you in dollars if its currency weakens against the dollar. The SEC’s Investor.gov explains that currency-rate changes can increase or reduce an international investment’s return. Investor.gov’s international investing guidance describes this risk.
Vanguard’s comparison for the first half of 2025 shows how large the difference can be: through June 30, international equities returned 17.9% in U.S.-dollar terms and 8.8% in local currency, with the weaker dollar accounting for approximately nine percentage points of the gap; U.S. equities returned 6% over the same half-year in that comparison. These figures are a dated example, not a reliable guide to future currency movements. Vanguard’s June 2025 currency discussion explains the comparison.
What to check before deciding whether to sell
Identify exactly what you own
“International investments” can mean a broad international fund, a single-region or country fund, individual foreign securities, or a global fund that also owns U.S. companies. Check the current prospectus, geographic exposures, benchmark, and fees. U.S. investors can get international exposure through U.S.-registered mutual funds and ETFs, American depositary receipts (ADRs), U.S.-traded foreign stocks, or, in some cases, foreign-market trading through a U.S. broker. The risks and costs differ by investment and route. Investor.gov outlines these access routes and considerations.
Make the comparison like for like
- Use the same start and end dates for the international and U.S. investments.
- Compare total returns, not one investment’s price change against another’s total return.
- Check that each investment is being compared with a relevant benchmark.
- For international holdings, distinguish U.S.-dollar returns from local-currency returns.
- Check whether a fund hedges currency exposure; do not assume two funds have the same currency behavior.
Currency can affect dollar-based results, but the cited sources do not establish how any particular pair of hedged and unhedged funds compares. Verify the fund’s current materials.
Revisit your plan, not just this period’s result
Consider your time horizon, risk tolerance, liquidity needs, and intended asset mix. Ask whether the international allocation was chosen as part of a long-term plan or because of a recent market trend. Diversification spreads exposure across markets, but it cannot guarantee a profit or prevent losses. Vanguard’s historical illustration of a hypothetical 60% U.S./40% non-U.S. stock portfolio showed a return close to 10% annualized over the decade ending December 31, 2024, with less risk than either an all-U.S. or all-non-U.S. portfolio in that comparison. It is a historical illustration, not a recommendation that every investor should use that allocation.
When rebalancing may make sense
If performance has pushed your portfolio away from a target allocation you chose for your goals and risk tolerance, rebalancing back toward that target can be a disciplined response. The important distinction is whether you are following a plan or changing your target because one region recently outperformed. Before trading, consider transaction costs and potential tax consequences for your account; those effects depend on your circumstances and are not quantified here.
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Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Do not treat a market valuation or a currency forecast as a dependable short-term timing signal. Vanguard’s June 30, 2026 model outlook describes its assumptions as hypothetical and variable, and cautions against extrapolating them over short periods. It says valuations tend to be poor predictors over short or intermediate horizons and should not be the primary reason for changing allocations. Vanguard’s return-forecast page provides the model context. Its forecasts are not promises or individualized advice.
How to evaluate international funds if you are comparing alternatives
Before replacing one holding with another, compare the features that affect both exposure and implementation. Fund-specific holdings, fees, tax treatment, liquidity, and hedging details should be checked in current prospectuses and official fund materials.
| What to compare | Why it matters |
|---|---|
| Geographic coverage and concentration | A broad international fund, regional fund, and country fund can have very different exposures. |
| Benchmark and index methodology | The benchmark helps show what market segment the fund is intended to represent. |
| Currency exposure and hedging | Exchange-rate movements can raise or lower U.S.-dollar returns; hedging details need to be verified for each fund. |
| Expense ratio and trading or conversion costs | Fees and transaction costs reduce the amount that remains invested. |
| Taxes and distributions | Tax consequences depend on the fund and the investor’s account and circumstances. |
| Liquidity and trading structure | Liquidity and trading arrangements can affect the ease and cost of buying or selling. |
| Fit with your total portfolio | A fund should be assessed as part of the overall allocation, not in isolation. |
International investments can also involve different disclosure practices, currency controls, political and economic events, and legal protections or remedies. These risks vary by market and security; Investor.gov recommends reviewing the investment’s disclosures and costs.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.When to seek individualized advice
If you need a personal allocation, tax assessment, or advice about a particular foreign security, a general article cannot determine what you should buy or sell. Consider speaking with a qualified financial or tax professional. U.S. investors can use SEC resources to check an investment professional’s background and registration status. Your residence, account type, holdings, goals, and tax circumstances all affect the decision.
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