Hold onto your wallets, a new investment platform with a familiar name is making it’s way to America. We’ll tell you all about it in our eToro review.
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.
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.
Although eToro is currently not an investing option for Americans, it soon will be (see next section below). But Europeans who are interested in trading in stocks, currency and other investments can use eToro to do so.
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.
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.
Cryptocurrency Trading Launching in the U.S.
This platform isn’t currently available in the United States. It had been for a period of time, and then it pulled out of United States markets. But eToro recently announced that it will be launching a cryptocurrency exchange in the United States again.
Users who are interested in eToro can sign up to be added to the waitlist (Click eToro USA under the Help and Education menu on the bottom of the webpage). The platform for U.S. investors will be similar, including many of the social features we’ll tell you about in then next section.
However, the platform will start by only allowing investments in 10 cryptocurrencies:
- Bitcoin Cash
- Ethereum Classic
eToro says that it will continue to add more as the year goes along. But don’t expect the eToro platform in the United States to offer all of the same investing options as the platform outside.
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: eToro offers something like a social media platform for traders. With Social Trading, you can see what other investors are up to. And if you like what they’re doing, you can use their CopyTrader feature to invest your money in the same way.
- Trading Options: This platform gives you access to a variety of investment options, including stocks, commodities, global equity indices, Forex currency pairs, and more.
- Potential for Commissions: If you’re good at trading, you can participate in the Popular Investor program to get commission when other users copy your trades.
- 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
Since I’m in the United States, I couldn’t walk through opening an eToro account. However, it’s pretty simple. You just need your email address and your basic information, including phone number and mailing address. You’ll also need to fund your account so that you have something to start trading.
Next, you’ll verify your account, which you can do right away or later. To verify, you’ll need a copy of your passport and a valid utility bill. This allows eToro to ensure that the information you’ve entered is valid and accurate.
You can fund your account with a credit card, via wire transfer, with Paypal, through Moneybookers, or with Western Union. Deposit amounts range from a minimum of $50 to a maximum of $10,000, depending on your funding method. You can find out more about opening an eToro account here.
What About Withdrawals?
Once you’ve started earning money on your investments you will, of course, want to be able to withdraw your money from your eToro account. To do this the first time, you’ll need a copy of your passport or another photo ID, both sides of the credit cards that you’ve used to fund your account, and a copy of a recent utility bill.
After the first withdrawal, you’ll be able to put in withdrawal requests from your eToro account. These requests are processed within five business days.
Copy Trading with eToro
Luckily, if you’re starting out with eToro, you can take advantage of their many tutorial videos, which can teach you the specifics of making different trades. 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.
To copy a trader, you’ll check out the Copy People page. You can search through different traders with portfolios in various risk categories. On this page, you’ll find things like the investor’s recent social activity, their trading habits and history, and their overall risk tolerance. You can also check out their actual portfolio.
Once you’ve found an investor you want to copy, you can just click the Copy button in the trader’s profile. You can decide how much of your money you want to put into the trader’s portfolio. Many traders recommend a specific amount to invest in their profile, but how much you actually invest is up to you.
You can also set a stop loss amount in case the trader starts to lose money. This defaults to 60% of the investment. So if you’re investing $1,000 in a copy position, your stop loss amount will default to $600. If you lose more than $400 with that option, the position will be closed, and the remaining money will go back to your account.
Traders sometimes make recommendations in their biographies, too, since some have longer-term investing strategies that account for potential losses.
In your portfolio, you can see the traders you have and decide if you want to track 100% with a trader’s portfolio. Or you can add or get rid of specific investments from that portfolio. You can also edit the stop loss information at any time, or stop copying the trader’s future trades.
With eToro, you can access various investment options through your portfolio. But you can also create a long-term investment in a balanced portfolio with CopyFunds.
Searching for CopyFunds is similar to searching for traders to copy. You’re able to view Top Trader CopyFunds, or look at CopyFunds that include specific themes. You can look at CopyFunds much like you can look at individual investors to copy and see the historical performance of the fund, its risk score, and more.
As with the Copy Trader feature, you can decide how much you want to invest in this type of portfolio. Again, though, remember that these portfolios are meant as a long-term investment.
A Note on Cryptocurrency Trading
This platform does allow for cryptocurrencies for investing. However, you can’t transfer cryptocurrencies out of the system yet. In late 2018, eToro is planning to launch a digital wallet, so that you can transfer them outside of the platform.
In your portfolio, you can add cryptocurrency investments. When you do this, eToro will purchase the cryptocurrencies on your behalf. So you’ll technically own them. But you cannot transfer them outside of eToro. Instead, you’ll have to cash them out and then make a withdrawal that way.
Again, eToro notes that it will likely have a digital wallet option later this year, so be on the lookout for that.
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 1.5%, and the spread for stocks is .09% 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 US dollars.
Bonuses and Promotions
As with some other trading platforms, eToro offers a variety of bonuses, which vary from time to time. A recent promo offered users $20 for friends who were invited and then joined the platform. Be on the lookout for other promotional bonuses from eToro in the future.
Besides typical introductory and referral bonuses, eToro also offers a variety of partner programs. 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.
Not sure if you’re ready to invest with a platform like eToro? Try a free practice account with $100,000 of pretend currency. You can treat this account as if it were your own, taking advantage of all the features eToro offers. This can let you figure out things like how quickly fees would eat into your profits, the best options for you to trade in, and how much you might earn with your trading choices.
You can connect with eToro through their online support forum, where you can put in 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 stocks and 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 CopyFunds 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 top investors are doing so that you can try out their investing strategies and techniques.Topics: Investing