If your international investments are lagging while U.S. markets climb, don’t sell solely because of that gap. First check what you own, compare like-for-like returns in U.S. dollars over the same dates, and see whether your allocation has drifted from the long-term plan you chose. A recent performance gap is not a reliable forecast of which market will lead next.
Why international investments can fall while U.S. markets rise
Different markets take turns leading
Stocks in different regions do not move in lockstep. A period in which U.S. shares outperform non-U.S. shares describes what happened during that period; it does not establish what will happen next. Vanguard’s historical illustration shows how narrowing a portfolio after one region has led can leave an investor less diversified when leadership changes. Diversification can reduce concentration risk, but it cannot guarantee a profit or prevent losses. Vanguard’s discussion of global diversification explains the trade-off.
As one historical example, Vanguard reported in 2025 that a hypothetical $100 invested in U.S. equities grew to $334 over the ten years ending December 31, 2024, while the same hypothetical investment in non-U.S. equities grew to $160. The illustration used relevant MSCI indexes and Bloomberg historical stock data; index performance is not directly investable, and the result does not predict future performance. In the same comparison, a hypothetical portfolio of 60% U.S. and 40% non-U.S. stocks returned close to 10% annualized over that decade, with less risk than either an all-U.S. or all-non-U.S. portfolio in the illustration. That is historical evidence, not a suitable allocation recommendation for every investor. Vanguard provides the methodology and context.
Exchange rates change U.S.-dollar returns
If you invest from the United States, the value of an overseas investment in dollars reflects both the underlying holding’s performance in its local currency and changes in the exchange rate. A foreign investment can rise in its home market yet be worth less in dollars if the currency weakens against the dollar. As the SEC’s Investor.gov puts it, “When the exchange rate between the U.S. dollar and the currency of an international investment changes, it can increase or reduce your investment return.” Investor.gov explains international-investing risks.
Vanguard’s comparison through June 30, 2025 illustrates the distinction: international equities returned 17.9% in U.S. dollars during the first half of 2025, compared with 8.8% in local currency, with a weaker dollar accounting for approximately 9 percentage points of the difference. U.S. equities returned 6% over the same half-year in that comparison. These are dated returns for the periods and measures Vanguard cited, not a guide to what currencies or markets will do next. Vanguard’s June 2025 currency analysis sets out the comparison.
What to check before deciding whether to sell
1. Identify exactly what you own
“International” may mean a broad foreign-stock fund, a single-region or single-country fund, individual foreign securities, or a global fund that also owns U.S. companies. Check the fund’s current prospectus, benchmark, geographic exposures, and fees. A concentrated country fund and a broad international fund do not represent the same exposure or carry the same risks.
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 route affects what disclosures and trading arrangements apply, so review the relevant official materials. Investor.gov describes these routes and their risks.
2. Make the performance comparison fair
Compare the same start and end dates, total returns rather than price changes alone, and benchmarks that match the holdings. For a U.S.-based investor, check whether the foreign return is stated in U.S. dollars or local currency, and whether the fund uses currency hedging. Comparing a local-currency foreign index with a U.S.-dollar U.S. index can give a misleading picture of the difference an investor actually experienced. The cited sources establish that exchange rates can matter; they do not establish how any particular hedged fund will perform.
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Ask whether your time horizon, risk tolerance, liquidity needs, or financial goals have changed. If they have, your target allocation may warrant review. If they have not, a region’s recent underperformance alone does not tell you that your long-term plan is wrong. Vanguard cautions that valuations tend to be poor predictors over short and intermediate periods and should not be the main reason to change portfolio allocations. Its forecasts are model-based assumptions, not reliable short-term signals. Vanguard describes the assumptions and limitations of its return forecasts.
4. Check whether your allocation has drifted
Compare your current portfolio weights with the target mix you deliberately chose. If weights have moved away from that policy, rebalancing toward the target can be a disciplined way to restore the intended risk profile. It is different from changing the target because the U.S. recently outperformed. Before trading, account for transaction costs and possible tax consequences; those depend on your holdings, account, and circumstances.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to evaluate international funds and their risks
If you are deciding between international funds or reviewing an existing holding, compare the features that determine what exposure you actually receive:
- Geographic coverage: which countries and regions the fund holds, and whether exposure is broad or concentrated.
- Benchmark and index method: what the fund is designed to track and how its index defines the market.
- Currency exposure: whether returns are exposed to exchange-rate changes or the fund uses currency hedging.
- Costs: the expense ratio and any trading or currency-conversion costs.
- Taxes and distributions: the fund’s distribution and tax treatment in your account and jurisdiction.
- Liquidity and trading structure: how readily the investment can be traded and what market arrangements apply.
- Portfolio fit: how the holding affects your overall allocation and concentration, not just its standalone performance.
International investments may involve different disclosure practices, foreign currency movements or controls, political and economic events, lower liquidity, additional fees or taxes, and different legal protections or remedies. Fund-specific fees, holdings, tax treatment, and hedging details should be verified in the current prospectus and other official fund materials. Investor.gov outlines these risks.
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When to seek individualized help
General guidance cannot determine the right allocation, sale, or tax decision for a particular person. If you need advice about your portfolio, taxes, or a foreign security, consider consulting a qualified financial or tax professional. U.S. investors can use SEC resources to check an investment professional’s credentials and registration status. Investor.gov provides information on checking professionals and international-investing risks.
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