Should You Use eToro for Your Investments?

There is no doubt that eToro is one of the most popular trading platforms around the world, in the UK, Europe and the US as well. The online broker was launched in 2007 (under the RetailFX brand), and claims to have 30 million registered users from over 100 different countries – that’s saying something.

But of course, this doesn’t mean much either, as popular as eToro is, you will need to know whether it suits your investor profile (e.g. are you looking for short or long term?), you will want to know its commissions and whether it’s a trustworthy broker (e.g. regulated by which body?).

To help you choose whether this platform is a good option for you, I have written this detailed review of eToro. I will also reveal (all) its commissions, pros, cons and aspects to consider before opening an account with eToro.

Please note: eToro allows you to invest in many long-term assets (e.g. cryptocurrencies, real stocks or ETFs), and in derivative assets via CFDs. CFDs are more complex assets and risk losing money, as they allow for leverage. 79% of small investors incur losses when trading CFDs with eToro. You should consider whether you can afford to take the high risk of losing your money.

eToro Pros & Cons

Let’s look at the main pros and cons of eToro, so you know what strengths it has and where it can be improved, and I’ll explain when it’s a good idea to use eToro and when you should consider alternatives.

The main pros of eToro are:

eToro’s Leverage Levels (Past performance doesn’t indicate future results)

And its cons to consider:

Who Should Use eToro?

By offering both CFDs, ETFs and real stocks, it’s a broker that suits many profiles (e.g. those looking for short-term trading and those investing for the longer term). It also has features that experts will like (e.g. adaptable leverage, and stop loss and take profit orders).

Additionally, it also has social networking features applied to trading, the large community of investors that has can be a good help to those who want to get started.

eToro has some aspects that are a little difficult to understand for beginners. For example, by offering leverage (borrowing money from eToro to invest larger amounts) can lead to extra fees if the position isn’t closed before the market closes.

* 79% of small investors incur losses when trading CFDs with eToro. You should consider whether you can afford to take the high risk of losing your money.

eToro in Detail

Is eToro Safe?

With eToro you can set up your account so that when you log in you are asked to confirm a code via your phone (e.g. you are sent an SMS), similar to logging into a bank’s website.

eToro 2-Step Authentication

This extra layer of security can be interesting so that no one can gain access to your account without your permission.

On the other hand, you can be confident that eToro isn’t a scam, it’s an online broker that has been operating since 2007 and has millions of users (investors) all over the world.

On the other hand, you can be confident that eToro isn’t a scam, it’s an online broker that has been operating since 2007 and has millions of users (investors) all over the world.

It’s also monitored by several agencies and has to comply with the regulations of the Cyprus Securities and Exchange Commission, the UK Financial Conduct Authority, the Australian Securities and Investments Commission and the US FinCEN.

eToro's Fees And Commissions

A very important aspect of choosing the best online broker for your investments is to look at the commissions you will be charged. In order for you to know what to expect from eToro’s commissions, I’d like to give you an overview of what to look out for:

eToro’s CFD Spreads

Examples of commissions and spreads

* In some countries. As of 3 Feb 2021.

Assets You Will Be Able To Trade With eToro

If you are new to investing with brokers like eToro, you may be a bit confused and not know exactly which products you should invest in (e.g. regular stocks with eToro or derivatives).

Let’s see what you can invest in with eToro:

CFDs (Contracts For Difference)

Until a few years ago eToro only offered CFDs (Contracts for Difference). These are derivative products, meaning that you don’t buy an asset, but a piece of paper (contract) that references the price of the (underlying) asset.

For instance, with a CDF on Apple stock, you don’t buy real Apple stock. It’s rather an agreement on the price of that Apple stock between you and the trading platform.

Trade CFDs with eToro (Past performance doesn’t indicate future results)

The advantages of these are that:

On the other hand, there are also some aspects that are not so encouraging, especially for beginners:

With eToro it’s possible to trade CFDs on many products such as stocks (e.g. over 2,000 different stocks on almost 20 different markets such as the (e.g. IBEX, NASDAQ, LSE, Zurich, DAX), currencies (e.g. EURUSD, EURGBP, GBPUSD, USDMXN, about fifty in total), 13 indices such as the DJ30, IBEX 35, S&P 500 or NASDAQ 100 and commodities such as copper, gold, oil or sugar.

* 79% of small investors incur losses when trading CFDs with eToro. You should study whether you can afford to take the high risk of losing your money.

Real Shares

Interestingly, eToro also allows you to buy real company shares. For example, it’s possible to buy shares in companies such as Iberdrola, Tesla, Apple, Facebook or Santander. What’s more, eToro doesn’t charge any commissions for investing in shares (in most countries) – be aware that they have a spread and they may charge you third-party fees like the one to process the stock purchase.

Trade real stocks with the eToro broker

There are hundreds of shares you can buy (more than 2,000) from markets such as the American, major European stock exchanges such as German, French and Belgian, as well as the London and Hong Kong stock exchanges.

* 79% of small investors incur losses when trading CFDs with eToro. You ought to consider whether you can afford to take the high risk of losing your money.

ETF (Exchange-traded Fund)

But if you prefer to invest in exchange-traded funds (EFTs), you can also do so with eToro.

ETFs available with eToro (past performances do not indicate future results)

This asset class is characterised by investing in whole indices to capture the performance of the entire market. For example, with eToro you can invest in ETFs that invest in the entire S&P500, European FTSE or in the public and private debt of the world’s major countries.

They are ideal for risk-averse profiles and those who are looking for long-term investments, personally index-linked products are a type of investment that I like very much.

Cryptocurrencies

A differentiating factor of eToro is that you can trade real cryptocurrencies such as Bitcoin, Ethereum, Ripple or Dash. This is something that few online brokers offer, and it can be a decisive factor if you are interested in this sector.

Another positive aspect is that you can use the eToro wallet to host your cryptocurrencies. But be aware that the functionality of this wallet is limited (e.g. you cannot get your passwords), but you can always transfer your cryptocurrencies to your own external wallet.

I would like to point out that eToro doesn’t charge a setup fee for their crypto wallet, but there is a fee for cryptocurrency transfers and exchanges (see above for details).

As of October 2022, it’s possible to invest in the following cryptocurrencies using eTroro: Bitcoin, Ethereum, BNB, Solana, Dogecoin, Polkadot, Shiba, Tron, Uniswap, Chainlink, Ripple, Dash, Litecoin, Cardano, IOTA, Stellar, EOS, NEO, ZCASH, Binance Coin and Tezos and a few others.

How Does eToro Work?

To use eToro you will need an internet connection and a browser (e.g. Chrome, Safari or Edge) to access the platform and trade. It’s also possible to use eToro from the free Android and iOS (iPhone and iPad) apps available on the platform.

Confirm an eToro account

Open An eToro Account In 3 Minutes

To open an eToro account, all you need to do is:

1. To visit www.etoro.com and register (in addition to a valid email address, you can use your Google or Facebook account for registration).
2. The next step is to confirm your email address.
3. To finish and be able to access all the benefits, you have to verify your account. Add your personal details (e.g. name and passport number), your investment experience and confirm your phone number (they send you a code).
4. To finish you just need to add funds, you can do this by transfer, using your credit or debit card or with PayPal and similar services.

Account Types With eToro

There are retail accounts for people without professional financial knowledge, like (probably) you and me. This type of account limits the trading you can do, for example, the leverage you can access is lower (and the risk is therefore lower, but not zero).

Please note that not all clients will have access to this professional account, depending on their country of residence.

The eToro Club

You may have noticed that in your eToro account, under your username once you log in, there is an icon with the word “Bronze.” This is your level in the eToro Club, it’s nothing more than a loyalty programme – the more money you invest with eToro the more value you get as a customer and the more benefits you receive.

Benefits of the eToro Club

The amount of money you have in eToro will determine your level. For example, you need to have $5,000 to be “Silver,” $10,000 to enter the “Gold” level and so on, you need to have more than $250,000 in balance to be “Diamond.”

For example, if you invest more than $50,000 with eToro you will belong to “Platinum+,” and among other advantages they offer you a subscription to the Financial Times and invitations to events (I don’t know which ones). Personally, eToro Club isn’t the most appealing part of their service to me.

CopyTrader And CopyPortfolios Features

eToro stands out as a social trading platform, meaning that there is a community of traders that you can interact with and follow (if you want to).

eToro has two types of social investing:

CopyTrader

With this feature, eToro lets you see what other eToro users are trading (if their profiles are public) and you can copy the trades.

This is a system where you don’t have to replicate the trades that the eToro carries out manually, instead eToro will automatically copy for you everything that this trader does.

Please note that you will have to invest at least $200 to use the CopyTrader feature and no more than $2,000,000 – if you have $2 million to invest, congratulations lol. It’s also not possible to copy more than 100 traders at a time.

eToro’s CopyTrader feature (Past performance doesn’t indicate future results)

On the other hand, the CopyTrader feature allows you to filter users to specify what you are looking for in the traders you are researching. For example, you can choose to filter users by the type of product they are invested in (e.g. Forex, stocks, CFDs, etc), their origin (where they are from), the minimum profit they have made and the length of time they have been in profit (e.g. 1 month to 2 years).

In addition, eToro also tells you how many users have copied a certain trader, so you can see which eToro users are most popular among other eToro users. eToro assigns a risk value to each trader that you can copy, I’m not really sure how they calculate it, but I would say it seems representative.

eToro CopyTrader Risk And Followers (Past performance doesn’t indicate future results)

When investing (using CopyTrader) you can decide how much money you want to add, and you can set a stop loss as you would with other investments. So, you make sure you don’t lose all the money you have invested if the fellow you copy turns out to be a shipwreck.

* 79% of small investors incur losses when trading CFDs with eToro. You ought to study whether you can afford to take the high risk of losing your money.

CopyPortfolios

Although somewhat similar to CopyTrader (automated trading on the eToro platform), CopyPortfolios has similarities to trading using a mutual fund. The difference is that the portfolio is hosted on eToro.

Although there are no specific commissions for using this service, when you open or close positions with eToro you are charged a spread, so you will be charged a commission every time the fund managers buy or sell assets.

eToro CopyPortfolios feature (Past performance doesn’t indicate future results)

There are three types of investments using CopyPortfolio:

• Top Trader Portfolio: You can consider this to be a mix of the investments of successful traders on eToro. It usually joins investors by groups, for example users who invest in stocks for the long term. I am not sure, however, how eToro measures traders success and why they pick some traders over others.
• Market Portfolios: Combines a selection of CDFs and ETFs on a certain theme, you don’t copy any trader or group of traders (previous case) but you copy a certain portfolio created from algorithms (which I couldn’t find how they work). For example, you can find portfolios in the video games sector, Chinese technology leaders or short investments in the banking sector.
• Partner Portfolios: These are portfolios created by various financial firms that collaborate with eToro, and you can find various types of portfolios. For example, a replica of the well-known investments of Berkshire Hathaway (Warren Buffett’s company) or the major cryptocurrencies.

Generally, this type of investment with eToro is more medium to long term as it’s a more fund-like approach. Using the CopyTrader feature (mentioned above) you can find profiles that are more suitable for the short term and higher risk.

Minimum Investments With eToro

Please note that in order to start investing with eToro you will need to make a minimum investment, here are the details of these investments:

• Cryptocurrencies: Minimum investment of $10 per trade.
• Stocks, ETFs and CFDs on stocks and ETFs: Minimum $10 investment per trade.
• Currency and commodity CFDs and indices: Minimum investment of $1,000.

As you can see, you can start with a small investment if you are interested in stocks, ETFs or CFDs. But the amount required will be much higher if you want to invest in other types of CFDs such as indices, currencies or commodities.

How Does eToro Handle Taxes?

The answer is easy. eToro doesn’t make any withholding tax on your profits (as other platforms may do).

In this case, it’s your responsibility to calculate and pay tax on any profits you have. Remember that you don’t have to pay tax on gains that are not yet confirmed (that is, until you close a position).

To make things easier for you, eToro provides you with a statement of your account with a summary of your investments and profits. Please note that this document is for information purposes only and to make it easier for you (or your tax advisor) to handle taxes.

eToro Frequently Asked Questions

Let me take this opportunity to answer some of the most common questions I get about eToro and its services.

What is eToro?

eToro is much more than an online broker to trade ETFs and stocks. It’s a rounder solution that allows you to trade CFD (e.g. indices, commodities, stocks, ETFs and more), additionally, you can also buy, sell and transfer cryptocurrencies like Ethereum or Bitcoin among others. Moreover, if you want to copy the investments of other users, eToro has your back with that as well.

Where is eToro Located?

eToro is an international company with Israeli origins, in fact, its headquarters are located in Tel Aviv. eToro is licensed by a few regulators like CySEC for European customers, the US, the UK and Australia.

Who Owns eToro?

That’s a difficult question, as for now eToro remains a privately owned company, although it seemed they had plans to go public in 2022 – but didn’t in the end.

Retail FX (former eToro brand) was founded in 2007 by Yoni Assia, Ronen Assia and David Ring. One can assume they may still have some stocks in the company – especially the first two (brothers), since they have important roles in eToro’s leadership team.

There are also talks of different investors backing eToro. For example, between 2007 and 2013 eToro raised about $30 million in four rounds. Chinese and Russian investment companies decided to join eToro with an additional $27 million contribution. And in 2018 another $100 million were raised for the project.

This means that (investment) companies like China Minsheng Financia, Chemi Peres of Pitango VC, Guy Gamzu or Ping An are most likely to be owners of eToro too.

Is eToro legit?

eToro is a completely legit company with headquarters in Israel. Besides that, it’s regulated by several countries like the UK (via the FCA), Cyprus, Australia and the US. On top of that, eToro is a publicly traded company too (in the FTSE UK), so the company has further requirements to ensure its viability and good practices.

What is the minimum trade size in eToro?

Well, that depends a lot on the asset that you are trading, and it may vary depending on where you are located. Having said that, for most users the following will apply:

• Stocks, ETF & cryptos: $10.
• CFD of currencies, commodities and indices: $1,000.

This minimum trade size will consider leverage, in other words, you can also invest $100 with a leverage of X10 for CFDs.

The minimum trade to copy other eToro users (CopyTrader) is $200. If you are planning to invest with eToro’s Smart Portfolios feature, be ready to invest a minimum of $5.000.

Who to copy on eToro?

If you are looking to take advantage of the CopyTrader feature packed in eToro, you may be wondering who should you copy.

Sadly, I can’t give you a direct answer of top financial-gurus that will make sure your investments triple by the end of the year. However, I can share some tips to pick the traders you ought to copy:

• Only copy those eToro users that are transparent and share their vision and goals.
• Double-check the risk that eToro traders take with their investments, make sure they are aligned with yours.
• Check how they’ve done in the past. Pay close attention at how much did they lose when the markets went south (e.g. COVID or the Ukrainian war). You want to pick a savvy trader that know how to minimise losses.
• Make sure that the assets they invest in, are the ones you’d like to invest in. In other words, if you don’t trust cryptos, don’t copy a crypto-based eToro trader.
• I’d only consider those eToro traders that have been around for some time and have a good record. But please remember, past returns don’t warranty future ones.
• It’s probably smart to diversify and copy several users, please ensure they actually trade in different assets and markets.
• Review occasionally their performance and re-asses if you need to change traders.

Is eToro a good option for trading?

On top of real crypto, ETF and Stocks, eToro allows you to operate with CFDs, a derivative that is often used when doing investment trading.

It’s suitable for currency, stock, ETF, indices, crypto and commodities trading. Furthermore, it has a ton of different markets you can invest in. However, please check the fees to make sure you find those acceptable.

Is eToro a Market Maker?

eToro business model is a bit complexed as it offers dozens of services, fees, spreads and so on. I wonder if many people, even working at eToro understand its business model 100%. I am sure I am missing some information here for sure, but I will do my best to explain how eToro operates.

Since eToro offers derivatives (via CFD), it has to act at times as a market maker by facilitating the trades for their clients. This means that each time an eToro user opens a CFD position, the broker has to take the opposite bid to ensure the trade falls through. This can bring some conflict of interests, as a broker can potentially profit from investors’ loses.

Having said that, eToro seems to follow an STP (Straight Through Processing) approach, where they compensate their users’ trades with the liquidity market to avoid overexposure. On paper, this means that they don’t make money of their users potential loses (or they make less money), but rather from the spread they charge to investors.

Does eToro pay dividends?

If you are looking to invest in a company with eToro, via fractional stocks or ETFs, you may be asking yourself if you are entitled to receive dividends; provided the company decides to share profits with the shareholders.

The answer is yes, with eToro you will be entitled to receive dividends when investing in a company using stocks or ETF. eToro will pay the dividend into your eToro account.

How do I withdraw funds with eToro?

When investing, the primary goal is to make some money, so at some point you can withdraw some. And of course, spend it on the things you enjoy like holidays, buying a new car or simply just for helping to pay the bills.

Before I show you how to withdraw funds from eToro, I want to let you know that eToro will charge a fee of $5, which honestly is pretty uncool.

All you need to do is follow these 3 easy steps:

• Click on the ‘Withdraw funds’ button.
• Select the currency and amount you’d like to withdraw. You may need to close some invested positions if you don’t have enough funds in your balance.
• Fill in the rest of the form and click on ‘Submit’.

How can I earn money with eToro?

That’s an easy one, just make sure all your investments have positive returns, and you will earn money with eToro – of course that is easier said than done. However, please keep in mind that investment dividends are a massive part of obtaining positive returns, so make sure you account for this with your investment strategy.

Having said that, another creative way to earn some serious cash whilst using eToro is to allow other eToro investors to copy your investments (Copy Trader) – well, at least some users are doing pretty well with it. Then you and eToro will split the revenue generated by those users.

eToro Review: Parting Thoughts

I know, this eToro review got a bit out of hand and in the end it was a bit long. But the truth is that it’s an interesting platform with many features and some complexity. So I got carried away.

But let me give you a summary of the most important aspects:

• eToro is a good option if you are looking to gain experience with trading or already know what it’s all about. It’s also not a bad alternative for buying fractional real shares, and even has some ETFs that you can trade (this has some limitations, see above).
• It’s certainly one of the most suitable investment platforms if cryptocurrencies are your thing. You can invest in cryptocurrencies, or even buy them and transfer them to your own external wallet (fees may apply).
• Besides, all their Copy Trader and CopyPortfolios options can be very interesting for many – personally I use eToro only with CopyTrader, keep in mind that I take a high risk, so I invest only a small part of my savings and divide the amount between several reputable traders.
• In my opinion, the other big positive aspect of eToro is the ease of use. It really is one of the most intuitive platforms and has many options for beginners. But keep in mind that this doesn’t take the risk out of your investment.

On the other hand, they are not for everyone.

• In general, beginners or those who don’t have time to study the world of finance might look at simpler solutions (e.g. indexed products) such as roboadvisors or ETFs.
• One of the not so positive aspects of eToro are the spreads. In general, I find them a bit high, but of course, they make it quick to start investing (but this doesn’t eliminate risk), you should consider what works best for you.
• And at the very least you will have to add $200 ($50 in the US) as an initial deposit, although this should be affordable for most.
• I have to say that in my experience, their support isn’t the fastest.

Alright, so now you should have a pretty good idea of what to expect from eToro, and if it fits what you’re looking for. But if you still have any doubts or questions, leave a comment and I will help you out.

eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.

Copy trading is a portfolio management service, provided by eToro (Europe) Ltd., which is authorised and regulated by the Cyprus Securities and Exchange Commission.

Investments in crypto-assets are not regulated. They may not be appropriate for retail investors and the full amount invested may be lost. It is important to read and understand the risks of this investment, which are explained in detail at this link.

eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.

eToro’s Reviews infromation sources:

www.upskillwise.com
www.etoro.com
www.cysec.gov.cy
www.fca.org.uk
www.businesin
www.investing.com
www.bloomberg.com
www.businessinsider.com
www.marketwatch.com
www.ft.com
www.wsj.com
www.wikipedia.com

eToro Review Updates:

08 May 2023 – General update
14 Mar. 2023 – Information sources added
25 Jan. 2023 – Available assets eToro update
23 Jan. 2023 – How to earn money with eToro?
22 Dec. 2022 – Withdrawal information about eToro
05 Dec. 2022 – Compliance requirements added
28 Nov. 2022 – eToro owners info. added
22 Nov. 2022 – Updated legal terms
08 Nov. 2022 – Updated the cryptocurrency fees
16 Oct. 2022 – How dividends work in eToro?
07 Oct. 2022 – Updated the list of available crypto on eToro
06 Oct. 2022 – What is eToro’s business model?
26 Sep. 2022 – Where is eToro located?
18 Sep. 2022 – ‘Is eToro a good option for trading’ info. added
31 Aug. 2022 – Information about what is eToro added
24 Aug. 2022 – FAQ about eToro’s company setup
10 Aug. 2022 – Min. trade size with eToro
03 Mar. 2022 – General eToro review update
26 Apr. 2021 – Affiliate disclosure added
22 Mar. 2021 – Initial eToro Review
10 Jul. 2021 – Review moved to upskillwise.com