I recently spoke with Tom Lydon, a financial adviser, blogger, and coauthor of the new book iMoney: Profitable ETF Strategies for Every Investor. Here's his advice for novice investors interested in building an all-ETF portfolio:

For a new investor, it's important to have diversification. Given that we've had a decline in the market, it's a good time to get in. I'd encourage large, mid, small, and international ETFs. From a diversification standpoint, Vanguard Total Stock Market (VTI) is a fund to consider. It's a good, quick allocation for someone who doesn't want to necessarily have to pick asset classes. The underlying index has a little bit of everything.

How much do you know about ETFs, one of the hottest investment products on Wall Street? Here are a few facts that may surprise you:

1. ETFs aren't new. Canada claims the first exchange-traded fund, but first U.S. ETF launched in 1993: S&P 500 Depository Receipts, also known as SPDR and pronounced "spider." While the first wave of ETFs tended to track broad market indexes, such as the S&P, the current generation slices and dices the market by industry, country, and sometimes obscure niches. HealthShares Infectious Disease ETF (HHG), anyone?

These days, perusing the selection of exchange-traded funds that cover the same industry seems like shopping for olive oil at Whole Foods: There are endless brands and variations on the same core product. The choices can be overwhelming: Should you bet on the iShares oil and gas ETF or go with the PowerShares version? There's also an SPDR fund to consider.

As of May 1, there were 107 industry-specific ETFs providing exposure to more than 30 different industries, according to a Morgan Stanley report released this week. By design, industry-specific ETFs allow investors to own a basket of stocks in a given slice of the economy. "It's a low-risk way to play an industry you might like," says Paul Mazzilli, Morgan Stanley's director of ETF research. "Instead of betting on one name, you can bet on, say, 20-something names."