Stock valuations in foreign markets may look more attractive than those in the US, but any profits earned are translated into US dollars, which float in value against foreign currencies. If the US dollar is strengthening against a foreign currency, it hurts your returns. If the dollar is weakening, you get a boost. It’s hard to time currency movements because they depend on interest rates, inflation, economic growth and other factors in different nations. Some ETF providers offer two ways to track international indices—one ignores currency moves…an identical version hedges the effects of currency swings. Best: Use a currency-hedged fund for overseas investing. Foreign-stock ETFs and their currency-hedged counterparts…
Developed-nation stocks…
iShares MSCI EAFE ETF (EFA). One-year performance: 18.37%.*
iShares Currency Hedged MSCI EAFE ETF (HEFA). One-year performance: 18.04%.
Total international stocks…
iShares MSCI ACWI ex-US ETF (ACWX). One-year performance: 17.13%
iShares Currency Hedged MSCI ACWI ex-US ETF (HAWX). One-year performance: 17.39%.
Japanese stocks…
iShares MSCI Japan ETF (EWJ). One-year performance: 20.57%.
iShares Currency Hedged MSCI Japan ETF (HEWJ). One-year performance: 25.23%.
Emerging-market stocks…
iShares MSCI Emerging Markets ETF (EEM). One-year performance: 14.14%.
iShares Currency Hedged MSCI Emerging Markets ETF (HEEM). One-year performance: 14.48%.
