Index funds have long been a Foolish way to gain instant, low-cost diversification without worrying about timing the market. Their ease and convenience may explain the growing popularity of exchange-traded funds -- mutual funds that trade like stocks. According to the Investment Company Institute, ETF assets totaled more than $572 billion of the more than $1 trillion in stock index funds as of Nov. 30.

Originally modeled after index funds, ETFs have gradually narrowed to target specialized slices of the market. While that's a boon to investors seeking specific investments, it also concentrates the risks of specialization, tilting a portfolio away from the diversification that makes index investing attractive.

Today, we're looking at ETFs with expenses of less than 1% that have performed the best over the past year. We'll then combine that information with the views of the collective intelligence of the professional and novice investors at Motley Fool CAPS and see which funds our participants have rated as the best.


Expense Ratio

1-Year Return

CAPS Rating (out of 5)

United States Oil Fund (AMEX:USO)




PowerShares DB Oil  (AMEX:DBO)




PowerShares DB Energy




iShares MSCI Brazil (NYSE:EWZ)




Market Vectors Russia (NYSE:RSX)








iShares S&P Latin America 40  (NYSE:ILF)




SPDR S&P Emerging Latin America




SPDR S&P Oil & Gas Exploration & Prod




PowerShares DB Agriculture  (AMEX:DBA)




Sources: Wall Street Journal. CAPS ratings courtesy of Motley Fool CAPS.

Tread carefully here, Fools; the market offers many exchange-traded funds and securities that look like funds, but aren't -- like exchange-traded notes. Moreover, few have a long history. In fact, only the two iShares funds have a three-year performance standard -- an arguably important milestone -- and only time will tell whether any of the others can build similarly solid track records over longer periods.

Climbing a wall of opportunity

While oil and precious metals typically jump to mind as prime commodities for trading, particularly while oil is at more than $125 a barrel and gold continues toying with $1,000 an ounce -- now it's just under $900 -- agricultural commodities might also be considered. One reason is that corn prices are pushed higher by demand as both food and fuel. Wheat has also experienced a surge in demand, such that the U.S. has said it will export about 23% more this year than originally anticipated. Further, wheat stored by farms is at its lowest level since World War II, and according to the market researchers at NDP Group, food prices are rising at their fastest pace in 17 years. The PowerShares DB Agriculture ETF is one fund that tracks the movement of not only corn and wheat but also soybeans and sugar -- two other important agricultural commodities.

The rising cost of food has led some investors like CAPS player SacramentoBulls to believe this fund will outperform the market. "Soft commodities are a little run up, but given the current economic situation, I think they are due for a gain over the S&P. Been to the grocery store lately?"

Others, like top-rated CAPS investor jerry1027 see more dire consequences for the surge in global demand for agricultural commodities, which should bring profitable investments.

Food. The bad news is; Food riots, droughts due to global warming, the use of food stocks to make ethanol, the expectations of the new middle classes in [Brazil, Russia, India, and China] and elsewhere to get to eat more meat and less grain (It takes ALOT of grain to fatten up a cow for slaughter) and again global unrest causing disruption in local crop production, which brings us back to food riots. Go Long Agro.

A basket of opinions

Although ETFs have been around since the 1990s, investors should be cautious about any ETF that lacks a long track record. Over on CAPS, let us know whether you think these ETFs will continue to outperform, or whether it's time for new ones to top the lists.