America's money is getting weaker -- and not just because of inflation. During the past year, the U.S. dollar lost 11% of its value against the euro and 9% of its value against the British pound. Part of the explanation for the dollar's downturn against major global currencies is the theme of what investment commentators call the "sell America" trade.
The "sell America" idea is that global investors are choosing to move money out of U.S. assets. "Sell America" proponents argue that the U.S. is becoming a less attractive environment for investors, in part because of recent disruptive changes to American trade policy and tariffs, rising U.S. national debt that could drive up bond yields, and recent possible threats to the independence of the Federal Reserve. Lower demand for U.S. assets could result in a rising price of gold, higher yields on U.S. bonds, and a weaker dollar.
Currencies and asset prices go up and down for complex reasons. It's not clear if the dollar's recent decline is directly related to any one event or policy decision. But one important data point is clear: International stocks are outperforming America. The Vanguard Total International Stock Index Fund ETF (VXUS 0.10%) gained 32% in the past year, while the S&P 500 index gained 15% and the Nasdaq-100 index gained 19%.
Let's look at why now could be a good time to own international stocks, and why this Vanguard ETF could be a particularly smart choice.
NASDAQ: VXUS
Key Data Points
How international stocks protect you from a weaker dollar
A good way to hedge against a weaker dollar is to buy international stocks and ETFs like the Vanguard Total International Stock ETF. Owning other countries' stocks can help reduce your risk of a falling dollar. That's because when the dollar goes down against other currencies, the dollar value of international stocks tends to go up. International companies are earning revenue in their own currencies, but American investors' accounts are denominated in dollars.
Let's say you bought a share of a European company for $100 at a time when the exchange rate was $1.00 to 1 euro. If the dollar weakens by 10%, that 1 euro becomes worth $1.10, and that share of stock is now worth $110 just from changes in the exchange rate.
Why buy international stocks
Some investors argue that Americans don't need to own international stocks, because so much of American companies' revenue comes from international markets. Just by owning the largest companies in America, you benefit from international trade. And for most of the past 15 years, U.S. stocks -- the S&P 500 index and the Nasdaq-100 index -- have strongly outperformed the rest of the world.
But along with changes in currency exchange rates, there are a few good reasons for American investors to own international stocks:
- Diversify your portfolio beyond the U.S. economy. In case the U.S. economy goes into a slowdown or U.S. government debt keeps growing to the point that it starts to scare global bond investors, you might want to have some of your money invested in other countries.
- Rebalance your portfolio. If you have only been buying U.S. stocks for the past several years, your portfolio might have grown too top-heavy with U.S. companies. Now could be a good time to rebalance and put some of your portfolio into international stocks.
- International stocks might be cheap. The price-to-earnings ratio on the S&P 500 index is currently 31.3, while the P/E ratio on the Vanguard Total International Stock ETF is only 17.8. There could be room for international stock valuations to grow compared to U.S. stocks.
Image source: Getty Images.
Why buy the VTI
The Vanguard Total International Stock ETF gives you exposure to 8,646 international stocks. It gives you access to markets in Europe (38.2% of the fund's holdings), emerging markets (26.8%), Pacific (25.6%), North America (8.1%), the Middle East (0.8%) and other parts of the world (0.5%). The ETF's top five holdings (as of Dec. 31, 2025) are:
- Taiwan Semiconductor Manufacturing -- a world leader in the semiconductor industry (2.98% of ETF)
- Tencent -- a Chinese internet and technology company (1.19%)
- ASML Holding -- based in the Netherlands, ASML is a leading innovator in the semiconductor industry (1.06%)
- Samsung Electronics -- this South Korean multinational conglomerate manufactures mobile devices, TVs, appliances and other electronics (0.98%)
- Alibaba Group -- based in China, Alibaba is a global technology company focused on e-commerce and cloud computing (0.82%)
These are some of the world's most important and innovative companies. The VXUS lets you own them for an expense ratio of only 0.05%. Whether or not the rest of the world decides to "sell America" in the future, owning international assets could be a good idea. Buying the Vanguard Total International Stock ETF could help diversify your savings, reduce your risks, and earn bigger returns.
