Everything from sending money to saving money has gone social and app-based these days, so why not trading? More online trading platforms are seeking to make trading easier for everyday investors. And one of the early comers to this market was eToro.
This trading platform started more than ten years ago with the goal of disrupting trading so that everyday investors could get into the game. Now, it offers a robust array of tools and a great interface for investors interested in doing their own trading. It also offers a social trading platform that’s an interesting twist on traditional trading.
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Is eToro a Scam?
Because it looks different from many other trading platforms, some people think eToro is a scam. But that’s not the case–eToro is legit. They’re a licensed brokerage registered by the Cypriot Investment Firm (CIF). And they’re regulated in Europe by the Cyprus Securities and Exchange Commission and in the UK by the Financial Conduct Authority. In the United States, eToro has been more recently licensed. As of this writing, it’s licensed in the following states:
- New Mexico
- North Dakota
- South Dakota
For a while, regulatory changes made eToro unavailable to U.S. based investors. But it’s been able to get licensed here in the United States, so investors can use some of its services. Currently, eToro is calling its U.S. rollout, which began in July 2018, Phase 1 of its services to the U.S. market. We expect to see them offer more functionality and options to American investors in the near future.
eToro describes the system as a Straight-Through-Processing platform. This means you, the investor, can basically leverage eToro’s broker license to access investments directly. The platform, of course, charges a fee for the service.
eToro also operates on a No Dealing Desk model, which means that they don’t change the price between you and the market. When you put in an order to make a trade during active market hours, eToro automatically transfers and processes the trade. They can’t change the pricing on their end, though prices can change due to market changes. It also has no limits or daily withdrawals.
eToro is monitored and regulated by FCA and CySEC. So, in short, no, it is not a scam. eToro is legit. With that said, trading platforms like this do have some pitfalls for less experienced investors. We’ll talk about those later in the article.
One of the interesting features of eToro is that it doesn’t necessarily focus on just short-term day trades or long-term investments. It offers both. So if you’re interested in doing your own investment trading on a short-term basis but also want to invest for the long haul, eToro can give you what you need to do it.
Some of the features of eToro include:
- Social Trading: In non-U.S. markets, eToro currently offers something like a social media platform for cryptocurrency traders. Investors can even replicate the trading activity of others they find interesting with the CopyTrader feature. This, however, is not yet available in the United States.
- Simple: eToro was founded on the idea of making trading more accessible. It started as a very visual platform that could introduce even the newest investors to various investing concepts. Though the platform has changed a lot since then, it’s still fairly intuitive and easy to understand.
- Fully Managed Options: As noted above, eToro could work for both those interested in day trading and those who want a managed portfolio option. The CopyFunds program offers managed portfolios on various themes and at various risk levels.
- Mobile App: Maybe you’re interested in managing your own investments but can’t sit in front of your laptop all day. Enter the eToro mobile app. It lets you trade, copy, and follow the trading social feeds on your mobile device.
Opening an Account
As with most investing platforms, eToro gives you a few hoops to jump through before you get started. You’ll need to sign up for an account with all the usual information. Then, you’ll need to verify your account with a verified phone number, a government-issued ID, and proof of address. Once your account is verified, you’ll be able to begin trading in cryptocurrencies using eToro.
You can deposit funds to trade in your eToro account by electronic transfer from your online bank account or through domestic wire transfer. The platform says it plans to add additional funding options in the near future.
Online banking is a simple way to fund your account. You can add a new bank account through Plaid, a third party provider that connects your bank account directly to eToro. A wire transfer will also work, though you’ll have to deal with any fees associated with such from your bank.
eToro’s minimum investment for online banking transfer is $50 for your first deposit and any additional deposits you make in the future. If you need to fund your account via wire transfer, the minimum amount is $500. And the maximum you can add to your eToro account in one day is $10,000.
What About Withdrawals?
Once your account is verified and has at least $50 available for withdrawal, you can withdraw it to your bank account. If you have funds invested in open positions, you can close them to make more money available for withdrawal. And you can withdraw any amount of $50 or more as long as you have the funds available in your eToro account. It should take between 3 and 7 business days to receive your funds in your bank account.
Copy Trading with eToro
Copy Trading isn’t yet available with eToro in the United States. However, you can check out what might be coming by looking at the European site. This video, for instance, talks specifically about how to copy traders. Since the social aspect of eToro is its most unique feature, this is one video you’ll want to watch if considering investing through eToro.
Investors can use the social aspect of eToro to find other investors they want to mimic. They can then copy another trader’s portfolio and decide how much money to put into a portfolio like that trader’s. eToro has built some nice functionality to stop your losses if the copied portfolio starts to lose money.
And you can see other investors’ biographies to get a feel for how experienced they are before you decide to copy them.
eToro offers a premium portfolio management service called CopyPortfolios, which will copy multiple markets based on an investment strategy. Currently, U.S. investors can choose from three of these portfolios:
- CryptoEqual – This portfolio is made of large cap cryptocurrencies at equal allocation.
- CryptoPortfolio – This portfolio focuses on cryptocurrencies with a market cap of over $1 billion.
- Crypto-currency – This focuses on two of the most popular cryptos, Bitcoin and Ethereum.
This can help you diversify your portfolio and cut your risks long term without thinking much about it. And if you don’t want to trade your own currencies and make all the decisions, a Copy Portfolio is an easy way to invest without all the work.
Currently the minimum to invest in a CopyPortfolio is $5,000. And you cannot remove part of the funds from this investment. Instead, you have to close it out completely. At that point, any available funds go back to your account.
A Note on Cryptocurrency Trading
This platform does allow for cryptocurrencies for investing.
And more recently, it started its own wallet system so that you can transfer cryptocurrencies back out of the system. You can close your positions in a currency and then withdraw it from the trading platform into your eToro Wallet. It can take some time for funds to show up in your wallet, but when they do, they’ll be available in cryptocurrencies that you own.
Fees and Spreads
One of the common complaints about eToro is that it has relatively high fees for its services and products. The fees vary depending on the investment option. For instance, as of this writing, the spread for Bitcoin is .75%, and the spread for Stellar is 2.45% per side. eToro also charges daily fees for buy and sell positions on stocks.
It’s important to understand the nuances of eToro’s pricing structure, which you can find here. Conversion fees may apply when you deposit or withdraw funds unless you do this in U.S. dollars.
Besides typical introductory and referral bonuses, eToro also offers a variety of partner programs, which are available only in Europe at this time. These include:
- Affiliate Program: Affiliate partnerships are made on a one-to-one basis, but you can earn money by referring others to eToro as an affiliate.
- Broker Program: As a broker on eToro, you can get premium customer service and serious payouts.
- Popular Investors: You can also earn money from eToro by becoming a popular investor. If others copy your investments, you can earn a 2% management fee for the portfolios that are copied from your own. You can learn more about the Popular Investors program and how to apply on eToro’s website.
You can connect with eToro through their online support forum, where you may submit a ticket on a variety of issues. You can also call their customer support line. Partners have a separate customer service program that they can take advantage of.
We were unable to test eToro’s customer support processes, but they have middle-of-the-road reviews online. The bottom line is that you should do your research before you put money into eToro, and be sure that you never need to get money out immediately. You may be able to reach customer service easily, but sometimes getting an answer can take a while.
Who is it Right For?
If you’ve been thinking of investing in individual currencies or are simply looking for a new way to make some of your investing decisions, eToro could be for you. Those who qualify could find it an interesting way to invest and potentially earn money on investments over the short term.
With that said, this may be a more volatile platform than you’re used to. Be careful to only invest money that you can stand to lose. eToro plasters this disclaimer all over its website because that’s just the nature of the type of investing it does.
If you’re looking for long-term investments, eToro’s CopyPortfolios are an interesting option, though you can probably find lower-fee options on the marketplace, Ally Invest, Merrill Edge and E*TRADE, just to name a few.
Still, though, eToro’s social feature has appeal. You could use it to check out what’s happening in the world of cryptocurrency investing.