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 $596 billion of the more than $1 trillion in stock index funds as of April 30 -- a 28% increase over last year, and up $25 billion from March.

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

As popular as they are today, ETFs haven't been around very long. The very first ETF, the SPDRs (AMEX:SPY), made its debut on Jan. 22, 1993. It wasn't until more than two years later that the MidCap SPDRs showed up on the scene, and it wasn't until the year after that that Barclays discovered their potential and unleashed a plethora of ETFs that tracked the indexes of 17 countries under its iShares brand name.

This week, we'll take a look at some of the best-performing ETFs over the past five years and combine this information with the views of the collective intelligence of the 110,000-plus professional and novice investors at Motley Fool CAPS to see which funds our participants have rated as the best.

ETF

Net Assets

Inception Date

5-Yr Return

CAPS Rating (5 max)

iShares MSCI Mexico

$1.3 billion

3/12/1996

281.3%

****

Energy Select SPDR (AMEX:XLE)

$6 billion

12/16/1998

237.5%

****

iShares MSCI Austria

$318.4 million

3/12/1996

205.0%

*****

iShares MSCI Singapore

$1.7 billion

3/12/1996

182.2%

*****

iShares MSCI Australia

$1.3 billion

3/12/1996

176.5%

*****

Source: wsj.com. CAPS Ratings courtesy of Motley Fool CAPS.

Tread carefully with ETFs, Fools: While the market offers many exchange-traded funds, few have as long of a history as these here. Indeed, not many have even a three-year return history -- arguably a key milestone. Only time will tell whether they can continue building a solid track record over longer time periods.

A strategy that pays dividends
Funny, but the top stories in international investing over the past half decade haven't been in the media-saturated markets of China or India, but rather in Mexico, Austria, and Singapore. Who would've thought that Australia would round out the top five? In fact, the so-called BRIC countries -- Brazil, Russia, India, and China -- don't even make the top 20. Why? Because they are the new Big Thing. The funds above represent some of the longest plays in ETF history, which means investors have a more defined track record to go on. The iShares MSCI Brazil Index (NYSE:EWZ) didn't trade until 2000, while iShares FTSE/Xinhua China 25 Index (NYSE:FXI) didn't hit the scene until 2004.

An unsurprising entrant on our list, though, is the energy sector SPDR which has been powered by rising oil prices and stellar earnings from holdings like ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX), which comprise nearly 30% of its holdings, and ConocoPhillips (NYSE:COP), which adds another 8% or so to the total.

There seems little that will stop Energy Select SPDR from being a top performer for the near future. Smaller holding Devon Energy (NYSE:DVN), for instance, which happens to be the biggest independent oil and gas producer in the U.S., has been freeing up cash through the sale of certain properties. It may be able to give earnings a boost through buybacks, as some analysts have noted.

CAPS member akok sees the natural gas side of the equation as being the catalyst to boost Devon's valuation higher. Here are three out of several reasons why this member likes Devon:

1. Natural gas is underpriced compared to crude oil both on a historical and $/BTU.

2. As with crude, natural gas will be increasingly more difficult to find and extract-new North American shale discoveries may hold prices for a few more years, but production will decline soon.

3. Given carbon emission limits, electrical utilities will look more toward natural gas as the energy of choice. Renewables are the alternative, but they remain high in price.

A basket of opinions
Although ETFs have been around since the 1990s, investors should exercise caution with any ETF lacking 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.

Bill Mann and the Motley Fool Global Gains team went to China last month to grill more than 10 companies on their growth strategies. Find out what investment opportunities they found with a 30-day risk free trial to the Fool's leading international investment service.

Fool contributor Rich Duprey does not have a financial position in any of the stocks or funds mentioned in this article. You can see his holdings here. The Motley Fool has a world-class disclosure policy that has been around the world and back again.