Exchange-traded funds have become vital to investors, offering the ability to build a diversified portfolio through a pooled fund investment while also keeping the flexibility of being able to trade shares whenever the stock market is open. Vanguard Group has developed its own set of ETFs, working in line with its well-established reputation for seeking to minimize the costs of its fund offerings to shareholders. 2017 has been a good year for the markets overall, but a few of Vanguard's ETFs have stood out for offering stellar returns so far this year. Below, we'll show you how Vanguard FTSE Emerging Markets (NYSEMKT:VWO), Vanguard Information Technology (NYSEMKT:VGT), and Vanguard FTSE Europe (NYSEMKT:VGK) have achieved the three top total returns among Vanguard ETFs in 2017 as of right now, along with some insight into what has led them higher.

The best Vanguard ETFs of 2017

ETF

Year-to-Date Return

Vanguard FTSE Emerging Markets

26.95%

Vanguard Information Technology

26.19%

Vanguard FTSE Europe

24.31%

Data source: Vanguard Group. As of Sept. 19, 2017.

How emerging markets bounced back

Emerging market stocks have been one of the big stories of 2017, as they've bounced back sharply for sluggish performance in recent years. A number of factors held back emerging markets in past years. Low commodity prices hurt many emerging economies that are more reliant on natural resources, holding back the performance of the Vanguard ETF and similar funds. Strong economic conditions in the U.S. made many investors reluctant to send their investment capital overseas, and solid returns made it unnecessary for those investors to chase returns elsewhere.

As a result, some investors saw emerging market stocks as cheap coming into 2017. Even though some had feared that the results of the 2016 U.S. presidential election would lead to backlash against emerging market nations around the world, that fear quickly gave way to greater optimism as investors sought the cheaper valuations that they could find abroad. A recovery in key commodity markets also helped inspire investors to look more closely at emerging markets. Looking forward, emerging markets have a lot further to run in terms of recovering fully from economic downturns than the U.S. does, and so ETFs like Vanguard FTSE Emerging Markets should remain good long-term investments for the future.

Vanguard logo.

Image source: Vanguard Group.

The rise of the tech sector

Technology has been a long-term growth sector, with innovations coming fast and furious over the past several decades. From the advent of the personal computer to the latest advances in mobile technology and cloud computing, the tech sector has produced huge profits for investors. Vanguard Information Technology has participated in that growth, with nearly 400 stocks among its holdings to help it capture its fair share of gains in the tech space.

The Vanguard Information Technology ETF might have been able to do even better had it looked more closely at stocks of tech players that aren't U.S. companies. The ETF's domestic focus has taken away the opportunity to invest in even more lucrative tech companies overseas, and Chinese stocks in particular have done quite well in the space. Nevertheless, investors can expect the Vanguard Information Technology ETF to keep participating in tech's overall boom as long as it lasts.

The sun shines on Europe

Finally, European stocks have done a good job of catching up to the soaring U.S. market in 2017, and Vanguard FTSE Europe has benefited from the effort. The European-focused ETF gives investors exposure to companies in most of Europe's key markets, including Germany, the U.K., France, and Switzerland. Many of the stocks it owns are financial and industrial giants, but you'll also find players in other sectors to round out a well-diversified portfolio.

Many investors see Europe continuing to outperform the U.S. market, as the Federal Reserve turns to tightening even as the European Central Bank remains accommodative in terms of monetary policy. Europe faces its own challenges on the economic and geopolitical fronts, but for those U.S. investors looking for the benefits that international diversification can bring to a portfolio, Vanguard Europe is a good and simple ETF choice.

Vanguard's best ETFs so far in 2017 cover a wide span of the financial markets. With conditions continuing to favor these areas, investors could easily see even further advances for these three Vanguard ETFs through the end of the year and beyond.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.