Should You Use eToro for Your Investments?

eToro Review Veredict

eToro Pros & Cons

eToro Features 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.

This added security layer ensures that no one can access your account without your permission, which is quite valuable.

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 & Prices

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

• Exchange rate: The primary cost on eToro is the exchange rate fee if you’re not using US dollars. Whenever you deposit or withdraw funds with eToro, it’s done in US dollars. While you can deposit in other currencies like Euros or British Pounds, there will be a commission, typically ranging from 50 to 150 pips, as is common with most brokers.
• Opening an account: eToro doesn’t charge you anything to open an account.
• Inactivity: Please note that if you don’t log in to their platform within 12 months (if you have funds) or 4 months (if you don’t), eToro will charge a $10 per month inactivity fee.
• Deposit: There is no cost for depositing money via bank transfer with eToro (although if you don’t deposit your funds in US dollars you will have to pay an exchange rate commission, see above).
• Withdrawal: A fee of $5 will be charged when withdrawing funds, to reduce the impact of this, try to withdraw funds less often and in larger amounts.
• Overnight: This is the financing fee eToro (or any online broker) charges for keeping leveraged positions open overnight. It’s a daily charge that can accumulate.
• Weekend: If you keep a leveraged position open on Friday at market close, you’ll be charged by eToro for borrowing funds over the weekend.
• Cryptocurrencies: When trading cryptocurrencies on eToro, a spread fee is applied (e.g., 1% for Bitcoin). Additionally, transferring cryptocurrencies to another wallet incurs a cost (e.g., ₿0.0005 for Bitcoin transfers) with a commission.

Examples of Fees & Spreads

Deposit Funds at Cheaper Rates

One way to reduce the commissions you will have to pay for currency exchange, if your main currency is not the US dollar, is to use a multi-currency online account that allows you to make deposits in other currencies (e.g. soles, pesos, pounds or euros) and also allows you to have an account in US dollars.

Accounts like Revolut or Wise allow you to exchange money into US dollars (and trade with it) at lower costs. They are ideal to combine with eToro and other brokers that will charge you commissions for exchange rates, not all trading platforms allow deposits from these accounts, but eToro does (at least using their card).

Assets Available for Trading on eToro

If you’re new to investing with brokers like eToro, you might be uncertain about which products to invest in, whether it’s regular stocks on eToro or derivatives.

Let’s explore the investment options available with eToro:

Real (Fractional) Shares

Interestingly, eToro allows you to buy real company shares. You can invest in companies like BP, Tesla, Apple, Facebook, or Santander. Moreover, eToro typically doesn’t charge commissions for investing in shares (in most countries). However, it’s important to note that they have a spread and may incur third-party fees for processing stock purchases.

On eToro, you have access to a vast selection of shares, with more than 3,000 to choose from. These options span across markets like American exchanges, major European stock exchanges including German, French, and Belgian, as well as the prestigious London and Hong Kong stock exchanges.

ETF (Exchange-traded Fund)

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

This asset class involves investing in entire indices to capture the overall market performance. For instance, on eToro, you have the option to invest in ETFs that track indices like the S&P 500, FTSE, or the public and private debt of major countries worldwide.

These products are particularly well-suited for risk-averse investors and those seeking long-term investments. Personally, I have a strong preference for index-linked products as they align with my investment strategy.

Crypto

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 advantage is the possibility to use the eToro wallet for storing your cryptocurrencies. It’s important to note that this wallet has certain limitations, such as not being able to retrieve your passwords. However, you retain the option to transfer your cryptocurrencies to your preferred external wallet at any time.

I’d like to highlight that eToro doesn’t impose a setup fee for their crypto wallet. However, there are fees associated with cryptocurrency transfers and exchanges.

As of Feb 2024, it’s possible to invest in the following cryptocurrencies using eTroro: Bitcoin, Ethereum, Solana, Dogecoin, Stellar, IOTA, EOS, Tezos, ZCASH, Uniswap 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.

Open An eToro Account In 5 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 up, 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 designed for individuals without professional financial knowledge, which likely includes most of us. They come with certain trading limitations, such as lower leverage, reducing associated risks (though not eliminating them entirely).

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

The eToro Club

You might have noticed that once you log in to your eToro account, under your username, there’s an icon labelled ‘Bronze’. This represents your level in the eToro Club, which essentially functions as a loyalty program. The more you invest (spend) with eToro, the greater value you hold as a customer, and the more benefits you can enjoy.

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 instance, if you invest over $50,000 with eToro, you’ll reach the ‘Platinum+’ level. This tier offers various advantages, including a subscription to the Financial Times and invitations to exclusive events (the specifics of which I’m not certain about). Personally, the eToro Club isn’t the most enticing aspect of their service for me.

CopyTrader & CopyPortfolios

eToro distinguishes itself as a social trading platform, which means it hosts a community of traders you can interact with and choose to follow if you wish.

eToro offers two types of social investing:

CopyTrader

This feature on eToro enables you to study the trading activities of other eToro users, provided their profiles are set to public. Additionally, you have the option to copy their 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 keep in mind that to utilize the CopyTrader feature, you’ll need to invest a minimum of $200 and a maximum of $2,000,000 – if you have $2 million to invest, congratulations! Additionally, you can’t copy more than 100 traders simultaneously.

The CopyTrader feature lets you filter users based on your preferences when researching traders. You can filter by the product they’re invested in (e.g., Forex, stocks), their location, minimum profit, and their length of time in profit (e.g., 1 month to 2 years).

On top of that, eToro displays the number of users who have copied a trader, giving you insight into their popularity. Each trader available for copying is assigned a risk value, although the exact calculation method may not be clear, it generally provides a representative indication.

When investing through CopyTrader, you have the flexibility to determine the amount of money you want to allocate. Additionally, you can set a stop loss, just as you would with other investments. This way, you can ensure that you don’t risk losing all your invested funds if the trader you’re copying encounters difficulties.

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.

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.

In general, this type of investment with eToro is geared toward the medium to long term, given its fund-like approach. For shorter-term and higher-risk options, you can explore profiles using the CopyTrader feature mentioned above.

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: Minimum $10 investment per trade.

How Does eToro Handle My 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 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:

On the other hand, they are not for everyone.

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 Frequently Asked Questions

What Is eToro?

eToro goes beyond being just an online broker for trading ETFs and stocks. It offers a wide range of features, allowing you to buy, sell, and transfer cryptocurrencies such as Ethereum and Bitcoin. Furthermore, if you’re interested in copying the investment strategies of other users, eToro provides that option as well. Social trading is also a significant aspect of this platform, fostering a sense of community among its users.

Where is eToro Located?

eToro is an international company with its origins in Israel, and its headquarters are located in Tel Aviv. eToro is licensed and regulated by several authorities, including CySEC for European customers, as well as regulatory bodies in 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, headquartered in Israel, is a legitimate company regulated by multiple countries, including the UK (through the FCA), Cyprus, Australia, and the US. Additionally, it is publicly traded on the FTSE UK, which imposes further requirements to ensure its viability and adherence to good practices.

What Is the Minimum Trade Size in eToro?

The minimum trade size on eToro can vary depending on the asset you are trading and your location. However, for most users, the following minimums apply:

• Stocks, ETF & cryptos: $10.

If you intend to copy other eToro users using the CopyTrader feature, the minimum trade size is $200. For those interested in using eToro’s Smart Portfolios feature, a minimum investment of $5,000 is required.

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 Market Maker?

The eToro business model is somewhat complex, given its range of services, fees, spreads, and other factors. I wonder if even many eToro employees fully understand its business model. While I may be missing some details, I’ll do my best to explain how eToro operates.

That said, eToro appears to follow an STP (Straight Through Processing) approach, where they offset their users’ trades in the liquidity market to manage risk and avoid overexposure. In simple terms, this means that eToro doesn’t primarily profit from their users’ potential losses (or makes less profit this way); instead, they generate revenue primarily from the spreads they charge to investors.

Does eToro Pay Dividends?

If you’re considering investing in a company through eToro, perhaps via fractional stocks or ETFs, you might be wondering whether you’re entitled to receive dividends if the company decides to share its profits with shareholders.

The answer is yes; with eToro, you are entitled to receive dividends when investing in a company using stocks or ETFs. eToro will deposit 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’.

Keep in mind that you will have to withdraw a minimum of $30, plus the $5 fee. If everything goes as planned, you should receive your money in a couple of days.

How Long Does It Take for eToro's Money to Arrive?

The time it takes for your funds to reflect in your eToro account can vary based on a couple of factors like the timing of your transaction (weekends might cause some delay) and the method of payment you’ve chosen. To give you a rough idea, let’s divide eToro deposits into two categories:

• Immediate payment methods: If you’ve opted for deposit methods like cards, PayPal, Klarna, Skrill, Neteller, or other similar electronic wallets, you’ll see your money in your eToro account right away.
• Bank Transfer: For bank transfers, you might need to be a bit more patient as it usually takes anywhere between 24 and 48 hours for your funds to appear in your eToro account. Do remember that if you make a wire transfer over the weekend or on a bank holiday, this can slow things down a bit more, potentially taking up to 7 days as per eToro’s guidelines.