eToro review: pros and cons of this broker
eToro is a modern broker that allows you to invest in shares in multiple ways. eToro is the place to be to buy your shares commission-free and to actively trade by means of CFDs. But is eToro a reliable broker? This extended review will share our detailed experiences with the broker eToro.
General conclusion review
eToro is a broker with a wide range of possibilities: you can buy commission-free shares, and you can actively trade by means of CFDs. Their user-friendly software also allows you to follow other investors. eToro is the perfect choice for the investor who is looking for a social and complete securities broker.
71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
In short: the pros
- + No fixed costs on physical shares
- + User-friendly & professional software
- + Follow other investors one-on-one
- +Reliable and regulated party
In short: the cons
- – Accounts are only in dollars
- – Costs when withdrawing money
eToro extended review
Would you immediately like to know more about a certain eToro aspect? Use the below links to navigate the eToro review:
- Which investment possibilities do you have?
- How do you open an account?
- What is the quality of the eToro platform?
- How high are the costs with eToro?
- How reliable is eToro?
- Which investments can be made at eToro?
- eToro manual: how do you trade with eToro?
eToro allows two ways of investing. We will cover both methods in this complete review of the platform.
Physical shares and buying cryptos
eToro could be used to physically buy for example shares and cryptos. In that case, you don’t use leverage, and you will become the actual owner of the security. A big advantage of this investment method is the fact you do not pay set commissions when you buy shares. Contrary to many other parties, you can invest in for example shares without additional costs.
Active trading in for example shares
You can also choose to actively trade in for example shares or cryptocurrencies. Active trading means you can as well invest in rising as in falling prices. By going short, you can speculate on falling share prices. This allows you to take a proper and profitable position when expecting bad news.
You also have the possibility to use leverage. By using leverage, you are not directly investing in the share. By using leverage, you invest in a CFD on a share. Leverage allows you to magnify your profits but possibly also your losses. Normally, you earn one dollar with every dollar increase. When you apply a 5-to-1 leverage, you will earn 5 dollars for each 1 dollar increase. This can, of course, work both ways. With leverage losses, can increase as well.
This way of investing is more suitable for the speculator who wants to beat the market. The great thing about eToro is that you have both options under one account. At any given moment, you can choose to ‘just’ buy a share for the long term or to actively trade in a share. This is without a doubt one of the main advantages of eToro in our review!
Opening an account at eToro is a piece of cake: in the first instance you only have to submit some basic information. Next, you will be able to unlimitedly try out the eToro platform by means of a demo. A demo allows you to buy and sell shares as if it were the real deal. The results you achieve are real, the only difference is you are not yet investing real money.
Would you like to invest real money? Then it’s time to switch to a live account.
Before investing with real money at eToro, you need to submit some additional information. Each reliable broker will ask to confirm your identity. Identity confirmation is required to comply with rules and regulations and will ensure people are for example not using their account for money laundering.
Besides, eToro will ask you some pretty easy questions, to determine whether you have sufficient knowledge about the different investment products. As soon as your account has been confirmed, you can make your first deposit. eToro allows deposits from $200 onwards. Investing small amounts of money is therefore perfectly possible. Depositing money is possible via all known methods: PayPal, wire transfer and credit cards are all available within the eToro platform.
An important part of each review is the broker’s software. Naturally, we have extensively tested all different possibilities to help you to properly determine whether investing at eToro is your cup of tea.
The eToro software is extremely user-friendly. The eToro developers have clearly given their best shot to develop the most user-friendly software possible. All securities can be easily found in the software by means of the search functionality. The icons are creating a very visual platform that instantly shows you what you are investing in.
You can open a trading position by using the online user-friendly software. You just look for the share concerned, you press on buy and like greased lightning you have opened a position. All in all, the eToro software scores very well regarding user-friendliness!
Social network: ‘social trading’
Another very interesting feature, which I have never seen before, is the social trading possibility. The eToro software is a bit like Facebook. You can start a discussion about whatever share you want to talk about, and you will notice many people will provide their feedback on the matter. This way you receive valuable input and feedback which is of course useful.
Not all of us have the same investment experience and knowledge. Some people just don’t have time enough to properly invest. These people will be happy with the copy trader functionality. The copy trader functionality is a unique feature that you do not see with many brokers. At the click of a mouse, you can follow a fellow investor. Next, his or her positions are automatically copied over to your account.
Within the platform you can see all the details and results of the investor you consider following. You can consult the return over time and the return on a monthly basis. Within the platform you can also find the risk class of the investor. If required, you can also directly communicate with the trader which fits perfectly with the social trading concept.
There are some additional features to protect your account. eToro for example allows you to automatically close your position when an investor you follow is suddenly making significant losses. This way, the system will avoid a lunatic to blow up your account. The best thing about the copy trader feature is the fact this feature can be used at no extra cost. When you are a good investor yourself, you can even earn some extra money by sharing your trades.
Past performance is not a guarantee for future results
Spreading your investments is an important aspect within the world of investments. By spreading your investments in a smart way, the risks linked to your investments will significantly decrease. eToro therefore allows you to follow portfolios. A portfolio can for example consist of a basket of shares in a certain sector. Other portfolios consist of multiple investors which follow a certain strategy.
CopyPortfolio is another eToro functionality to automate your investments. We strongly believe in “the more options, the better” philosophy and therefore this wide range of options is a strong pro within the eToro review.
Graphs and technical analysis
Another strong point of eToro is the graphs. The software allows you to easily add various technical indicators that can help you to make a decision. Think for example about horizontal level indicators which help you to determine the perfect moment to buy or sell a share.
Another strong point within our review is the fact you can request a wealth of background information. Many shared trades come with a written analysis. You can also consult important facts and figures about the company. Moreover, you can read eToro’s general feeling and sentiment about the company, and you can get an idea of the number of people who buy or sell the share. All this background information can be used to take your investment decisions.
Each company needs to make money. eToro is no different. But how does eToro make money and are the rates used by eToro reasonable? This costs chapter of the review will tell you all about the costs related to investing at eToro.
Costs buying physical shares
Buying physical shares is entirely without commission. This is quite exceptional: most brokers charge fixed transaction costs per share. Buying shares without commission can therefore be quite attractive to people who would like to open a position by investing only a small amount of money. A strategy that is often impossible at many traditional brokers since the transaction costs take away a big part of your return.
You do pay a so-called spread. The spread is the difference between the bid and the asking price. Every broker charges a spread, so this can’t be avoided. Spreads can differ from one broker to another, though. In our experience the spreads of eToro are a bit higher compared to some other brokers. Nevertheless, the commission-free trading aspect does make buying shares via eToro often still cheaper. Only when you would consider buying shares with substantial amounts of money, another broker can be a better choice.
All in all, the costs of buying shares at eToro are favourable. This favourable position is achieved thanks to the lack of fixed costs. Another strong and important point within our review.
Costs trading shares
If you decide to use leverage while investing or if you short stocks, you will have to consider additional costs. In this particular case, you borrow some money from the broker. Similar to borrowing money from a bank you will have to pay transaction costs. At eToro these transaction costs are 0.09%.
You will also have to deal with financing costs. If your position is still open overnight, you pay an interest rate on it. You can calculate the financing costs by dividing the interest rate by 365. Nevertheless, the absolute value you have to pay per day will often still be acceptable. It’s nevertheless important to remember investing with leverage will cost you an arm and a leg in the long run. Therefore, only use leverage for short-term investments.
Costs exchanging currencies
eToro accounts are displayed in dollars, and it is unfortunately impossible to open an account in another currency. Both when withdrawing and depositing money, eToro charges costs for exchanging other currencies for dollars. The exchange costs are 50 pips or 0,0005 cents per foreign currency. When you deposit and again withdraw the same amount the costs are approximately one percent.
This is for sure a weak point within our review. After all, you are immediately losing some money due to exchange costs. A loss that could have been prevented. Some other online brokers for example, like Plus500 or Markets, do not charge these costs because you can open an account in a foreign currency. However, if you plan to trade with dollars this is of course not an issue.
Having a dollar account could be a good thing, even when your country uses another currency. This is especially the case when you plan to trade American shares. It would avoid you to exchange dollars for euros time after time again, saving you a significant amount of money you can use to invest. So, having to open a mandatory dollar account isn’t necessarily disadvantageous. Whether this is a disadvantage depends on the securities you are planning to invest in.
A weak point within our review is the fact eToro charges you extra costs when withdrawing money. eToro is one of the few brokers applying this policy. No matter which amount you withdraw, you always pay a $5 fee at eToro. When you are only investing $50, this is of course a huge additional cost. We therefore hope that eToro removes these ridiculously high costs sooner rather than later.
A crucial aspect when talking about brokers is of course their reliability. In this chapter we will check whether it is safe to deposit your money into an eToro account.
eToro is a large and well-known Israeli broker established in 2007. eToro serves clients all over the world. It’s even one of the few brokers which accepts American customers. Nowadays, the company has about 10 million clients. Given the size of the company, it is likely that eToro will continue to exist for a long time.
In our experience depositing money into an eToro account is safe. Because the clients’ money is put into separate accounts, your money will even be safe in case of a bankruptcy. This also means the people of eToro will not use your deposited money to invest themselves. Besides, we have both tested withdrawing and depositing money and in both cases nothing abnormal or suspicious happened at eToro.
Withdrawing money at eToro in the blink of an eye!
Another proof of reliability is the fact eToro has all required regulations and licences. eToro is for example regulated by CySEC in Cyprus and by FCA. A broker cannot be regulated if he will not adhere to and comply with a set of rules and regulations. These are all strong indications eToro is a reliable broker.
The eToro customer service is easily reachable via live chat. You can ask your questions in your mother tongue which eases and fastens problem resolutions. Ticket submission is also an option but not a preferred one because it takes more time. The eToro customer service seems to be reliable and responsive.
According to some people eToro must be a scam. They wonder how a broker can stay in the running when buying shares is offered free of charge. Logically, a broker has other ways to make money. Lets for example take investing with leverage whereby eToro earns money thanks to the financing costs. In the section about costs you can read how eToro makes money.
Conclusion: how reliable is this broker?
eToro seems to be a very reliable broker. eToro is at least not a scam or a fraudulent broker. eToro is a safe place to deposit your money and to start investing.
eToro offers a wide range of security investment opportunities. Among other things you can invest in:
- Hundreds of international shares
- Commodities like oil and gold
- Different index funds
- Currencies like euros and dollars
- Cryptocurrencies like Bitcoin and Ripple
The wide range of securities at eToro is a strong point. The chance you want to invest in something which is not available at eToro is small.
This short eToro manual will explain to you how to sell or buy a share via this platform. Before opening a position, you first need to determine the security you would like to buy or sell. By means of their search functionality you can easily browse to the security which you want to invest in. Select the security to go to the next screen:
1 buying or selling
You can choose to buy or to sell a security. When you buy a security, you are expecting a price increase, and you will achieve a positive result when the price actually increases. When you sell a security, you are expecting a price fall, and you will achieve a positive result when the price actually falls.
This is the place where you indicate the amount you want to spend on buying or selling shares. When you choose an amount, which is higher than the amount on your account, you use leverage. When you don’t do this, you are physically buying the security without using a CFD.
3 stop loss
A stop loss is a price level at which you determine to automatically buy or sell the security. We always advise people to use a stop loss. In this way you prevent losing your entire investment in one investment.
The leverage you apply can be consulted here. When not using leverage, you are physically buying the share or the cryptocurrency. When you do use leverage, you use a CFD.
5 trade or order
Here you can choose to place an order instead of trading directly. An order allows you to automatically open a position at a certain price. That way you can automate your investment strategy and you don’t have to constantly stare at your computer’s screen.
eToro club: loyalty is rewarded
When you deposit a significant amount, you will get extra benefits. The eToro club can to some extent be compared to the frequent flyer program of your favourite airline. There are 5 reward levels whereby the first benefits are received with deposits starting from $5000. The benefits and privileges can add up considerably. The highest levels for example grant you access to exclusive sports and gala events. At the lower levels you will receive significant discounts for currency exchange.
Risk warning investing at eToro
eToro allows you to invest in a wide range of different securities. Think about shares and cryptocurrencies. It’s also possible to trade CFDs.
CFDs are complex matters and come, due to the leverage use, with a high risk of losing money. 62% of the private investors are losing money when trading CFDs with this provider. Ensure you know the ins and outs of CFDs and carefully consider whether you can afford the high risk of your money loss.
Past return on investment results are no guarantee of future results.
Very volatile non-regulated investment product (CFDs). No EU-protection for investors.
This content is made available for educational purposes only and not for the purpose of rendering investment advice.
The main advantages of eToro
- The social platform offers extra, unique possibilities
- eToro allows investing in a wide range of shares
- Free of charge possibility to copy other investors
- The eToro software is extremely user-friendly
- eToro is a regulated and reliable party
- A responsive and helpful customer service
- You can buy shares Commission-free.
eToro risk warning
eToro is a multi-asset platform which offers both investing in stocks and crypto assets, 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. 71% 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.
Crypto assets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading crypto assets is unregulated and therefore is not supervised by any EU regulatory framework.