Exchange-traded funds, or ETFs, are investors' newfound darlings.

They've poured around $1 trillion into the investments. And every possible sector is covered -- including equity, fixed income and commodities -- among the 1,000-plus ETFs available.

Most exchange-traded funds mirror a broadly diversified index such as the Standard & Poor's 500. This collection of securities is bundled and then sold on an exchange. Essentially, an ETF is a mutual fund that trades like a stock, says John Gabriel, ETF strategist at Morningstar. "(Investors) can buy a full sector at one shot," he says. "It's a pretty simple concept."

ETFs come with risk

But with ETFs' popularity comes more risk as newer launches, such as leveraged or inverse ETFs, seek out more exotic territory. And sector funds are getting riskier too; there's even an ETF based on nanotechnology.

"As the market grows, there are lots of launches," says Noel Archard, head of U.S. product at iShares, which offers more than 200 ETFs. "More than half were launched in the last two or three years. Investors need to get a handle on what's out there."

That means shifting through more "noise," he says.

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