eToro: a famous investment broker

What is eToro?

eToro is a broker that allows you to invest in a wide range of assets, including stocks, ETFs and cryptocurrencies. However, the platform’s forte is CFDs, which are very complex and risky instruments that we will come back to shortly.

eToro relies heavily on social elements. It’s no coincidence that there is a large community here that makes social trading their investment philosophy. For the uninitiated, this type of trading consists of copying the actions of other investors, whose performance can be consulted and viewed by all. While from one point of view it’s an interesting practice for the less experienced, let’s consider the other side of the coin:

• Copying the operations of others does not allow us to gain experience, make mistakes and improve. The control is in someone else’s hands;
• one person’s strategies may not suit another. Aspects such as risk tolerance, objectives, financial status and much more are not considered;
• Others can also make mistakes: having a track record of positive performance does not guarantee that it will be the same in the future. By copying a person, we are not protected from losses.

eToro therefore allows you to invest your money in various assets, to the extent you wish and at zero or reduced fees. We will come back to this point in the dedicated paragraph, so that all the costs are on the table.

We’ll say it right away: the company is totally legitimate and anyone who claims it’s a scam is wrong. eToro operates worldwide and has various certifications and regulations, so on this point we can rest easy.

More worrying, however, are some of the products offered, such as the aforementioned CFDs.

Contract For Difference are complex instruments belonging to the category of derivatives. The problem, however, is not with the platform, but with the type of investor who approaches these complex instruments, being enticed by the profit opportunities of leverage and ignoring the risks. As always, we will never tire of repeating it: you need the right knowledge to avoid taking a step too far.

Let’s continue with a bit of company’s history.

"Many advanced instruments for the user"

History of eToro

The company was founded in Israel in January 2007. Three entrepreneurs were behind the project: David Ring and the Assia brothers, Ronen and Yoni; the latter has been CEO since that year.

Initially eToro was called RetailFX and focused on currency exchange.

The online trading platform was launched in September 2007, and was simpler than many others available at the time. This is one of eToro’s great merits: it has introduced millions of people to the world of investment thanks to its ease of use.

Over time it has been updated several times and new assets and products have been added. The arrival of OpenBook, the world’s first social investing platform, was remarkable. This event had a profound impact on the fintech world, so much so that today there are several companies offering a service of this type. There is no shortage of examples in the crypto sector either; such as Bitget, which has always placed great emphasis on the social features it offers.

In 2012 it was the turn of the mobile application of eToro. However, be careful about investing using your smartphone: it’s convenient, but to consult information, make comparisons and carry out a good technical analysis, the ideal is to sit in front of your computer in peace and quiet and with a sufficiently large screen. Or at least, that’s the writer’s point of view.

2017 was the year of cryptocurrencies, one of the platform’s strong points.

Today, eToro has more than 30 million users (although only a part of them are active, let’s underline this) and is present in various parts of the world, including Europe and the United States of America.

After this quick overview of some of the main stages the company has gone through, we can go into more detail. We’ll start with what is most important to us: safety.

How safe is eToro?

It could offer us enormous variety, zero commissions and many other advantages, but we would never choose a broker if it were unable to guarantee high security standards.

By security we mean two distinct aspects:

• The reliability of the platform itself, as well as its compliance with current regulations;
• The holding of funds, both in terms of external attacks and in the event that the platform should fail or have financial problems.

Like several brokers operating in Europe, eToro has a headquarters in Cyprus and, consequently, is subject to the laws of this country. The European division of the company is duly authorized to operate under the supervision of the Cyprus Securities and Exchange Commission (CySEC), the Cypriot equivalent of the American Securities and Exchange Commission (SEC). The legislation applied is MiFID 2 and guarantees high standards of transparency and protection.

Okay, we understand that eToro is a perfectly legitimate broker. But what about the second point, the security of funds?

First of all, client funds are kept separate from those of the company. Therefore, even in case of problems, what belongs to the users remains theirs.

Then there are other protections such as the ICS (up to 20,000 euros per person) and a free insurance with a maximum coverage of 1 million euros for each customer.

Let’s look at the cyber security side.

According to the official documentation, the funds are all deposited in top-tier banks, with information encrypted using SSL technology.

Each user’s personal account can be protected thanks to 2FA (two-factor authentication), which we recommend activating on any broker, exchange or centralized finance platform such as Nexo.

For the sake of completeness, here is the link to eToro’s security guide.

"Fund and user security side, nothing to say: eToro is in compliance"

How much does it cost to get started with eToro?

At the time of writing, the minimum initial eToro deposit is $50.

Each deposit after the first one must be a minimum of $50, rising to $500 in case you want to use wire transfer.

These figures refer to personal accounts. For corporate solutions, the minimum initial amount for is $25,000, but the number may change from state to state.

"Getting started with eToro requires a minimum deposit of $50"

The products offered by the platform

The time has come to give an overview of the products and assets offered by the platform.

Let’s start with shares. On eToro we can find a fairly wide selection, which mainly includes companies listed on American stock exchanges. Compared to some other brokers, the selection is however more limited and does not allow you to trade less known or up-and-coming stocks.

On the plus side, shares can also be purchased in fractions, which makes investing in high-priced securities accessible to anyone. The minimum transaction is 10 dollars and, where applicable, dividends are received.

There are also hundreds of ETFs (at the time of writing), including those of large investment companies such as Vanguard, iShares, Invesco and VanEck. However, there is a problem: many of these ETFs are not harmonized, which means higher taxation for European customers.

Before investing in an Exchange Traded Fund, not only through this broker, make sure it is harmonized by doing some research on the specific product. The abbreviation UCITS in the name of the ETF must be present.

In any case, if you are looking for a broker to invest mainly in ETFs, eToro is probably not the best solution out there.

It also offers raw materials, foreign currencies and indexes to complete a comprehensive range of asset types.

What about cryptocurrencies? We’ll get to that in a moment. eToro offers 85 coins and tokens to buy and sell. All the market giants are present, including bitcoin, Ethereum, Ripple, Chainlink and BNB. There is also space for some memecoins, including DOGE and Shiba Inu.

Some cryptocurrencies can be transferred from eToro to other wallets we own. To do this, you must also have the eToro Money app, the electronic wallet created by the broker. This article explains the steps to transfer your cryptocurrencies.

There’s also space for NFTs. Thanks to Delta, an app developed by eToro, we can explore the world of Non-Fungible Tokens and, if we want, we can also connect our web3 wallet.

eToro is a good choice for accessing a variety of products and assets, so you can invest using a single account. However, if you only intend to trade in a specific category (only stocks, only crypto, and so on), it’s better to use a more specialized service with a wider range of products.

"A good selection of assets of different types"

Depositi, prelievi e commissioni

What are the fees of eToro? Here we come to a topic you need to know before investing. Let’s look at them asset by asset.

Stocks have zero commissions on tickets, rollovers and management. Instead, the market bid/ask spread is applied (find out what the spread is here). Attention: the number may change from state to state.

Cryptocurrencies have a purchase and sale commission of1%, plus the spread.

CFDs have a more complex structure, which can be consulted on the page of eToro commissions.

Let’s take a look at the other costs.

Depositing is free, except for any charges that may be applied by our bank or the payment method used. Remember the minimum amounts of $50 by card and $500 by bank transfer.

How much does it cost to withdraw from eToro? Each withdrawal from eToro, which must be at least $30, is subject to a flat fee of $5, regardless of the amount. If you are a member of the Platinum, Platinum+ and Diamond clubs, this fee is waived.

As this is a dollar-only account, we’ll have to take the EUR/USD exchange rate into account. Each deposit or withdrawal operation involves a conversion and the relative commissions. These amount to 150 PIPs (1 PIP is equal to 0.0001 for the EUR/USD pair).

Here lies another pitfall: exposure to the dollar, a potential problem for non-US users. By converting euros into American currency, we will in fact be placing ourselves on the currency. If the exchange rate evolves favorably for the dollar, no problem, on the contrary, we will earn. But if there is a weakening, when we withdraw the deposited capital we will get fewer euros (or other currencies), sustaining a loss.

Furthermore, the inactivity fee is not pleasant. After 12 months of total absence from the account, $10 per month is deducted until the available balance is exhausted. To avoid this expense, it is sufficient to log in at least once every 12 months. This fee encourages you to operate, which does not create a psychologically healthy mechanism for investors without sufficient experience. Therefore, be very careful and don’t let yourself be influenced.

Finally, from November 6, 2023, a stamp duty reserve tax of 0.5% is applied to securities listed in the United Kingdom.

Having completed the overview of eToro fees, let’s come full circle and talk about taxes.

How do you pay taxes on eToro?

Here’s some bad news: as we are based abroad, we will have to manage on our own when it comes to declaring and dealing with tax issues.

However, those who already work with crypto exchanges and CeFi, except with Italian companies, should be used to it. Therefore, when using eToro we will have to manually fill in a document (like a spreadsheet) that keeps track of our movements, capital gains and losses and what we may have to pay in the end.

When in doubt, don’t hesitate to consult an accountant, so that you can take the right steps from the beginning to avoid any problems. The tax authorities are not to be trifled with.

Pros and cons

Let’s look at the pros and cons of the platform, summarizing what we’ve seen so far.

Pros

• Ease of use, from account creation (which requires a KYC procedure) to operation;
• Possibility to operate from a smartphone (which we do not recommend except for consultation and ordinary operations);
• Zero share commissions;
• A good choice of tools and assets;
• Social trading (in some ways a con, but from other points of view a pro);
• The platform brings anyone closer to the world of investments and also offers fractional shares;
• Compliance with European regulations;
• Demo account;

Cons

• Exposure to the US dollar (if you’re not american could be a problem);
• Currency conversion costs should not be underestimated;
• There are alternatives that offer a wider choice of specific asset classes;
• Social trading (the laziest could use it without reflecting or learning);
• The platform brings anyone closer to the world of investment (a pro, but also a con when it comes to absolute beginners);
• eToro tends to push towards trading, which is a problem if you don’t have perfect control over your emotions;
• CFDs are risky, but here they become accessible to everyone.

Pros and cons must be carefully evaluated, and then you can decide if this broker is right for you. You can also limit yourself to trading with the demo account, “play” with the platform and then choose more consciously.

You can sign up for eToro through this link: it’s free!

We have already answered the question “is eToro a scam?” above, but we will repeat it: no, it is a perfectly legal and legitimate company, with advantages and disadvantages for the consumer.

How much can you earn with eToro?

Well, we wanted to finish by answering one of the most frequently asked questions.

Using eToro, as with any other broker or exchange, there is no guarantee of profit. The company simply provides tools for investing in certain assets, but nothing more. It is then up to the user to carry out their research, set objectives and act accordingly.

Any investment carries risks that can be more or less significant. Nothing is guaranteed and starting with the idea of how much you could earn is not really ideal.

Let’s focus on the path, accumulate experience, move cautiously and, over time, we will certainly achieve satisfactory results. If we want, eToro will be one of the means by which to move forward.

"There is no certainty of gain, let us always remember that"

Final considerations

Overall, eToro is a good platform for investing with ease, as long as you’re well aware of the associated costs and risks (primarily exposure to the dollar).

If your goal is to invest only in cryptocurrencies, we recommend other platforms such as ByBit, Binance or Coinbase. However, if you are looking for an all-round service, perhaps to be combined with other more specific platforms, you may have found what you are looking for.

Sign up for eToro here: it’s free. Follow the easy official instructions to open an account.