Many people have asked me how do I invest in US stocks. Another question that I always get asked is, “what’s my opinion of eToro?”, which I will give my honest to goodness experience with the platform.
In this blog post, I will try to be as honest as possible about my experience of using eToro for 2 years.
How Did I Found Out About eToro
I started using eToro for investing in 2017. A friend recommended it to me, telling me that it only needs $200 as a deposit. If you may know, most online stock brokerages in the US demands a lot more initial deposit. My main broker for example asks $10,000 for its initial deposit. Which not many people can accommodate. Since most of us, just wants to try investing in the US, not many of us are willing to shell out half a million pesos just for testing the waters.
So I did try using eToro for a time. I still have an account with eToro that is not yet bankrupt, fortunately.
Its pretty straightforward. eToro has a page for your portfolio and the buying and selling stocks. They have a take-profit and cut-loss feature. Features that not many investors find useful, but traders might love.
Its surprising that eToro have analyst coverage. Its pretty useful. In the Philippines, we don’t have any one central location for all the analyst forecasts, so we end up opening different stock brokerage accounts to follow the analysts we deem “good”. But in eToro its all in one page for the stock you are trying to research.
Going down the research page for FACEBOOK, you’ll see the list of analysts covering the stock. As well as their recommendation, fair value / target price and the analysis report.
If you find analyst report valuable, then this is a treasure trove of information for the do-it-yourself investor.
I think the most popular feature of eToro is the CopyTrade feature. Since the platform covers worldwide, there are a lot of investors and traders using it. You can see other people’s portfolio and their performance over the years. Best of all? You can copy them.
How eToro’s CopyTrade works?
The way CopyTrade works is just like a subscription service. You copy a trader/investor and your portfolio will mimic his portfolio. When he buys a stock, your portfolio will also buy the same stock. When he sells, yours will also sell. You get the point, its auto-pilot.
With CopyTrade, you can move on to more important things, like playing Dota or the less productive things, focusing on your job. Sky’s the limit.
What Asset Types Can You Invest in eToro
You can invest in:
- Currencies (FOREX)
Be a Fund Manager with eToro
You can become a portfolio manager and earn 2% per year of assets under management as an eToro Popular Investor.
You can earn money by being a fund manager in eToro. When people use CopyTrade on you, you will earn a percentage of the amount that they are betting to copy you. Yes, that’s right, you make money if people copy you.
If you’re that kid in school where other students copy assignments from, its time to make money out of it.
There is a requirement if you want to be the popular investor that other people copy.
Popular Investor Requirements:
- Equity >= $500
- Minimum Copiers 1 (who is not a family member/relation)
- Minimum AUM (Asset under management) $200
- At least 2 months of stats
- Historical and current risk score of 6 or below (including maximum risk score)
- Your profile includes your real name, a picture of yourself and a description of your trading strategy
- No more than 25% of your equity is copying a specific person or invested in a CopyTrade
Just like the fund managers, you will earn 2% per year of assets under management (amount that is being used to copy you).
My Portfolio Experience with eToro
I didn’t make use of the CopyTrade feature of eToro because I want to invest on my own. But when I started investing, there are some few things that I noticed that made me ignore eToro as a serious platform for investing long term.
My stock performance suffered after 3 months, after discovering some features. You see, eToro uses margin accounts. The reason they have small initial deposits is because the $200 deposit will automatically becomes a margin account.
What margin account does is eToro loans you money so you can buy more stocks. This is no different from real estate investing where you borrow money from the bank in buying properties that are too expensive for you to buy on your own.
This is a good thing and a bad thing. Since this is a loan, you will need to pay for the interest. And the interest for a margin account in eToro is paid everyday.
For some people, like me, I don’t like margin accounts. Since I hold stocks for a very long time, holding costs will eat so much of my profits. There is a way to remove this margin in eToro, its to deposit more money into it. The last time I checked, $100,000 must be deposited in order for the leverage to be removed. It may change of course from the time of this writing and I will update this etoro review once there are rules in place.
Once you reach a certain amount, eToro will remove the leverage. Which, I am not comfortable doing, because I am already settled with my other broker who I have been with for so many years. You don’t want to go in and out of stocks just to transfer brokers. That’s not a very wise thing to do.
Update: As of Jan 2021, you can now remove leverage on your account. There is no more fund requirement to remove leverage.
So even if I made +76.99%, my equity is still near the $200 initial deposit. I only made $3.15 from the 76.99% in buying Berkshire stock. This is because of the margin interest ate almost $80 worth of available cash.
How to Deposit Fund into Your eToro Account
This is one of the reason why I recommend eToro only if you want to get started quickly in investing in international stocks. The reason for this is this, the process of opening an international broker is long. It takes a lot of paperwork, and when you finally finish that paperwork, you now have to wire transfer the fund or money into your account. And here is the thing, you can’t do it online. The wire transfer needs to be done inside your bank, supported by a bank representative, filling up forms. And the money would be sent 2 to 3 days.
Why eToro is better for getting started fast is because, you can use PayPal or your Credit Card and you can get started immediately. Just click on the “Deposit Fund” link inside your eToro account.
Enter the amount and choose the payment method.
After trying eToro for almost 2 years there are a couple of things I discovered that this platform might be a good fit for.
Testing the US Stock Market (Rating : 5 out of 5)
eToro is great for people who wants to test out the US stock market. You can get a feel for the market without having to spend lots of money opening a stock brokerage account.
Traders (Rating: 5 out of 5)
eToro is great for traders. Since there is a cost in holding a stock for long term, short term traders have the advantage in this platform. Long term investors is at a disadvantage if they hold on to a stock for too long and the stock did not go up faster than the interest for the margin eats up available cash.
Portfolio Managers (Rating: 5 out of 5)
For people who want to start a fund management business, you can start with eToro. If you’re good at what you are doing (trading / investing), people will notice, and they will use CopyTrade on you. The more people do that, the more money you’ll earn.
Short Term Investors (Rating: 5 out of 5)
Its still a good platform for investors, just not the one who wants to hold on to a stock for long long years. So if you’re an investor who wants to use eToro, you might want to limit your holding period and sell at a specific number of years. As long as you keep in mind the interest payment for the margin, I think investors will still prosper in this platform.
Long Term Investors / Value Investors (Rating: 3.5 out of 5)
I don’t think long term investors would benefit from being forced into a margin account. Because of the nature of the market, long term investors might not pull the plug faster than the margin could handle. Or the stock did not go fast enough from the interest payments eating up cash. So I don’t think its a match for long term investors. But its still a good platform for testing the waters and getting the feel for investing in the United States. I will still recommend it as a starting ground for new investors in the US.
Of course, I might just be a bad investor. That is also a possibility.
You don’t really have to think really hard for this. eToro is a great platform if you want to test the waters in investing in the US stock market. Just be careful if you’re a long term investor though, you might be surprised at how fast interest payments eat up your cash. But if you’re a trader and a short term trader, try it out, you might enjoy using it.
So that’s it for my eToro review. I hope you learned something from my experience. Did you try eToro? How was your experience? Leave your answer in the comments section below.
Try eToro and invest in the US.
( 73% of retail CFD accounts lose money )
Disclaimer: Your capital is at risk. When you invest in stocks/ETF etc. Cryptoassets are a highly volatile unregulated investment product. No EU investor protection. Your capital is at risk.
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFD assets.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% 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.
This content is intended for information and educational purposes only and should not be considered investment advice or investment recommendation.
Cryptoassets are unregulated and can fluctuate widely in price and are, therefore, not appropriate for all investors. Trading cryptoassets is not supervised by any EU regulatoryframework. Past performance is not an indication of future results.