An exchange-traded fund (ETF) that tracks other ETFs rather than stocks, bonds or derivatives. ETFs of ETFs track the performance of other ETFs, which may have direct exposure to the underlying securities they track. Watch: Understanding ETF Taobiz explains ETF Of ETFs ETFs of ETFs are tools that provide more diversification than regular ETFs. They can be constructed based on certain desirable factors such as risk levels, time horizons or sectors. One of these financial instruments can give an investor broad exposure to many different sectors and regions. Typically, ETFs have a lower expense ratio compared to more managed funds such as mutual funds.