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 $559 billion at the end of February -- a 29% increase over last year.

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.

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 10 years and combine this information with the views of the collective intelligence of the 97,000 professional and novice investors at Motley Fool CAPS to see which funds our participants have rated as the best.

ETF

Net Assets

10-Year Return*

Inception Date

CAPS Rating

iShares MSCI Mexico Index  (AMEX: EWW)

$1.6 billion

16.7%

3/12/1996

*****

iShares MSCI Austria Index  (AMEX: EWO)

$296.7 million

12.6%

3/12/1996

*****

iShares MSCI Malaysia Index  (AMEX: EWM)

$1.1 billion

9.6%

3/12/1996

*****

iShares MSCI Singapore Index  (AMEX: EWS)

$1.7 billion

9.2%

3/12/1996

*****

iShares MSCI Sweden Index (AMEX: EWD)

$233.8 million

7.8%

3/12/1996

*****

Source: The Wall Street Journal and Morningstar.com. CAPS Ratings courtesy of Motley Fool CAPS. Ten-year return is annualized through March 31.

Tread carefully with ETFs, Fools; while the market offers many exchange-traded funds, we remind you that few have as long a history as those displayed here

A strategy that pays dividends
Undoubtedly, many investors would be surprised to learn that one of the top-performing ETFs over the past decade has not been in one of the so-called BRIC countries -- Brazil, Russia, China, and India -- but rather in Austria. Of the 169 investors who have rated the ETF on CAPS, only three have found something negative in the prospects for outperformance.

However, a top-rated All-Star with the prescient screen name Allstar13913 recognized in November that with a weak dollar, Europe looks more attractive and should continue to find more room to grow.

I think Austria is a great market to hedge against the dollar falling further. This ETF has had great returns the last couple years, and still has a lot of room to run.

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.