Review: Best ETFs So Far in 2008

The top-performing ETFs from the first half of 2008 show a common theme -- commodities.

With the price of crude hovering around $130 a barrel and inflation fears beginning to surface, this trend is not a shocker. Challenging conditions have made for a market in which only 12.1% of all ETFs have even seen price appreciation of 5% or better in the first two quarters of 2008.

Year to date, there has been no better ETF than the United States Natural Gas Fund(UNG Quote). The fund, which uses futures contracts to track the price of natural gas, has surged 60.9% since the beginning of the year. This sharp move higher has surpassed even that of oil.

"Oil rallies last year were significantly greater and independent of natural gas, a phenomenon not too common since both come from the same hole in the ground many times," says Morris Glasgow, Managing Director and Portfolio Manager for Sterne Agee Investment Advisors. "Now the gap to oil has been somewhat filled."

Glasgow thinks that natural gas will trend higher over the long run, but this ETF could be reaching a short-term plateau.

"We would expect over the coming summer months of 2008 that UNG may take a breather," he says. "And if oil prices reverse course to any degree, speculators may drop the position to protect profits, or go the other side of the trade. Though long-term trends suggest natural gas -- and therefore UNG -- may rise in value over the next decade, as demand is significantly greater than supply replacement."