Recommended Free Tools
If your international investments are lagging while U.S. markets rise, don’t sell solely because of that gap. First confirm what you own, compare equivalent returns over the same dates, and check how currency affected the results. Then decide whether your portfolio still matches your long-term target. If it has drifted, a policy-based rebalance may make sense; changing your target to follow the recent winner is a different decision.
This is general educational information, not individualized investment or tax advice. The right response depends on your holdings, goals, time horizon, account and circumstances.
As an Amazon Associate I earn from qualifying purchases.
Why international investments can fall while U.S. markets rise
Markets in different regions do not move in lockstep. A period when U.S. stocks outperform non-U.S. stocks describes what happened over that period; by itself, it does not show which region will lead next. For a U.S.-based investor, exchange rates can also widen or narrow the performance gap shown in dollar terms.
Quick wins for a faster PC:
Repair Windows errors before they cause bigger problemsFix Now →Scan for outdated or missing drivers - takes under a minuteDriver Scan →Currency changes the return a U.S. investor sees
A foreign investment’s U.S.-dollar return reflects both the performance of the underlying assets in their local currency and changes in the exchange rate. If the foreign assets gain in local currency but their currency weakens against the dollar, the investment can still lose value when measured in dollars. The SEC’s Investor.gov explains that exchange-rate changes can increase or reduce an international investment’s return: International Investing.
Vanguard’s comparison through June 30, 2025 illustrates the difference: it reported international equities returned 17.9% in U.S.-dollar terms in the first half of 2025, compared with 8.8% in local-currency terms, with currency contributing approximately 9 percentage points. U.S. equities returned 6% over that same half-year in Vanguard’s comparison. These are dated historical figures, not a forecast or a result every international fund would have produced. See Vanguard’s currency and market discussion.
Make sure the comparison is like for like
Before reacting to a chart, match its start and end dates and compare total returns rather than mixing price changes with returns that include distributions. Check whether the international figure is in U.S. dollars or local currency, and whether the holding is currency-hedged. Also confirm the benchmark and geographic exposure: a global fund may own U.S. companies, while a regional or single-country fund can behave very differently from a broad international index. A local-currency index return is not the same as the dollar return a U.S. investor experienced.
What to check before changing your portfolio
- Identify the holding. Review the fund or security’s prospectus, benchmark, geographic exposures, currency approach and fees. Establish whether it is broad international exposure, a region or country fund, individual foreign securities, or a global fund that also includes U.S. stocks. Investor.gov describes common routes to international exposure and the risks to review: SEC guidance on international investing.
- Verify the performance comparison. Use the same dates, return measure and relevant benchmarks. Separate local-currency results from U.S.-dollar results, and account for currency hedging if applicable. Do not assume two funds with similar names provide the same exposure.
- Revisit your plan. Consider your time horizon, risk tolerance, liquidity needs and intended allocation across your total portfolio. A short-term regional lead is not evidence that the leader will continue to outperform over your investment horizon.
- Compare your current weights with your chosen target. If an allocation has drifted, consider whether rebalancing under your existing policy is appropriate. Take account of transaction costs and possible tax consequences in your account; the impact depends on your circumstances.
- Seek qualified help for individual questions. If you need a personal allocation or tax assessment, or advice about a specific foreign security, check an adviser’s credentials and U.S. registration status using SEC resources.
Should you sell international stocks or funds?
Recent underperformance alone is not a complete reason to sell. Selling may be consistent with your plan if your goals, time horizon, liquidity needs or risk tolerance have changed, or if you have decided that the holding no longer fits your intended allocation. But replacing an allocation simply because another region has recently done better amounts to changing the plan in response to past returns.
The Tool Desk
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 →Vanguard’s historical illustration shows the trade-off in one specific period: a hypothetical $100 invested in U.S. equities grew to $334, while $100 in non-U.S. equities grew to $160 over the ten years ending December 31, 2024. Vanguard based the comparison on relevant MSCI indexes and Bloomberg historical stock data. In a separate illustration over that same decade, a hypothetical 60% U.S./40% non-U.S. stock portfolio returned close to 10% annualized and had less risk than the all-U.S. or all-non-U.S. portfolios in the comparison. These are historical examples, not directly investable results or a recommended allocation for every investor. Past performance does not guarantee future results. Details are in Vanguard’s discussion of global diversification.
Diversification can reduce concentration risk, but it cannot guarantee a profit or prevent losses. Vanguard’s ten-year outlook discussed in 2025 assigned a 66% probability to international equities outperforming U.S. equities, based on valuation and earnings-growth differentials. That was a dated model outlook, not a certainty or a current forecast. It should not be treated as a prediction of what will happen next.
How to rebalance without chasing performance
Rebalancing means bringing the portfolio back toward an allocation chosen for your goals and risk tolerance. It is not a call that one region is about to win. If your existing policy sets target weights or rebalancing rules, use those rules rather than inventing a new target from a recent market move. Consider transaction costs and tax consequences before trading.
There is no single international-stock percentage established here as right for every investor. The target should reflect the whole portfolio and the investor’s circumstances, rather than a recent performance ranking. Vanguard’s 2026 forecast page describes its model assumptions as hypothetical and variable and cautions against using valuations to make short-term allocation changes. Forecasts are not guarantees; see Vanguard’s return forecasts and methodology.
Risks and costs to consider
International holdings can involve different disclosure practices, foreign-currency movements or controls, political and economic events, lower liquidity, additional costs and different legal protections or remedies. Depending on how you invest, there may also be currency-conversion costs, fund fees, trading costs or tax considerations. Check current official fund materials for the specific holding’s fees, tax and distribution treatment, liquidity, holdings and any currency hedge; these details are not interchangeable across funds.
U.S. investors can access 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. A fund can provide diversified exposure, but it still has costs and risks. Read its current prospectus and confirm that the underlying exposure fits your overall plan.
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
