We develop a dynamic investment strategy with Markov regime switching (MRS) in asset allocation with international iShares exchange‐traded funds (ETFs). Using daily ETF data, we show that a portfolio based on the dynamic MRS strategy outperforms one based on static mean‐variance strategies after transaction costs. This dynamic investment strategy not only captures the regime shifts in the highly frequent trading process but also can be practically used with tradable ETFs. We investigate the reasons for predictive misjudgments and assess the contribution of each regime's investment strategy, providing insight into the characteristics of the MRS model and modifying our views on why the MRS strategy outperforms traditional strategies.