We conducted a user study to investigate the effect of visual context in handheld augmented reality interfaces. A dynamic peephole interface (without visual context beyond the device display) was compared to a magic lens interface (with video see-through augmentation of external visual context). The task was to explore objects on a map and look for a specific attribute shown on the display. We tested different sizes of visual context as well as different numbers of items per area, i.e. different item densities. We found that visual context is most effective for sparse item distributions and the performance benefit decreases with increasing density. User performance in the magic lens case approaches the performance of the dynamic peephole case the more densely spaced the items are. In all conditions, subjective feedback indicates that participants generally prefer visual context over the lack thereof. The insights gained from this study are relevant for designers of mobile AR and dynamic peephole interfaces by suggesting when external visual context is most beneficial.