eToro: crypto, fees… The essentials

Are you getting into trading and hesitating to register on eToro? Here is everything there is to know about this platform, which has the particularity of offering “social trading”.

eToro is a online trading platform : Individuals can register to invest in different financial products. The platform plays the role of intermediary between the various financial markets, by executing their orders with them. The platform was founded in 2009 in Israel. It operates in more than one hundred countries. Its European headquarters are based in Cyprus. It practices “social trading”, that is to say that users have the possibility of copying the movement of “influencer” traders to try to reproduce their strategy.

Cryptocurrencies, stocks… What financial products are available?

The platform allows investing in assets such as stocks, currencies, commodities, indices (ETFs), as well as crypto-assets (cryptocurrencies like bitcoin, ethereum…). It also gives access to CFDs (contracts for difference) backed by various assets. The platform also offers a Copy Portfolio, through which investors can access a portfolio of stocks from a predefined sector, and invest in the entire portfolio, without selecting assets one by one, in order to diversify their portfolio.

What are the fees on eToro?

As on all trading platforms, there is a fee schedule that varies according to the assets in which the Internet user invests, their quantity, the duration of the investment… On eToro, transactions are carried out mainly in dollars. This means that the fees are applied in dollars, and that for people who fund their accounts in euros, conversion fees will be added.

The broker displays 0 euros fee for buying and selling shares on long positions without leverage, and no commission. On the other hand, for short positions, fees apply. For contracts for difference (CFD) on Euronext and internationally, a fee of 0.09% is levied on all positions (purchase and sale), as well as evening and weekend rollover fees for the purchase of shares. For ETFs, the fee is 0.09% per part, plus a fee for leveraged short positions. Finally, fees ranging from 0.75% to 5% are levied on investments in cryptocurrencies.

The site charges custody rights for shares: 22 cents per day to buy and 12 cents to sell, applied to the amount borrowed. A $10 fee is also applied when account inactivity reaches twelve months, provided there are funds remaining in the available balance. However, eToro agrees not to close any open positions to recover this inactivity fee. To stop the collection of these fees for inactivity, all that is needed is an activity of any kind, such as a simple connection to your account.

The withdrawal fee are $5. On the other hand, there are no fees for opening, managing or closing an account, and access to real-time prices is free for stocks and ETFs. Conversion fees apply to any deposit that is not made in US dollars. Withdrawal fees are waived and conversion fees reduced for clients who have higher equity on the platform.

The platform is accessible from any device with an Internet connection and offers an application available for iPhone and for Android devices. To start trading, all you have to do is create an account on the site. Before investing money, the user must complete his identity, answer questions to assess his knowledge of trading, and read a number of documents regarding eToro’s educational tools and general risk information. .

You must then make a deposit on the eToro account, by means of a payment by credit card, equivalent to at least 200 dollars for an initial deposit and 50 dollars for a new deposit, in order to have capital on the site. which allows you to trade. Unlike traditional trading players, eToro does not work with a tax envelope (a bank account specially designed for investment): the sums invested and earned are temporarily hosted by partner banks on behalf of eToro, and the investor must then transfer them to their own bank account in order to use them.

Once the registration is complete, the various market places covered by eToro are accessible, and the user can invest in them as he sees fit: he just has to select the asset that interests him and click on “Trade” .

eToro offers a copy trading feature: its technology makes it possible to automatically copy the strategy of other traders in real time, for those who wish to do so. The investor then defines a certain amount that he wants to allocate to copy trading, and his investment will automatically follow the movements of the trader(s) he is following. However, the site advises do not invest more than 40% of your capital to follow a single traderbut the minimum is 200 euros.

It is possible to consult the risk score, history and portfolio diversity of all traders. This can allow, within the framework of a copy trading strategy, to select the most serious traders and displaying the least risky behaviors. The platform additionally offers social trading functionality, i.e. the ability to chat with other investors.

Is eToro a serious site?

eToro is a platform that benefits from several guarantees: it is regulated by the Cyprus Securities & Exchange Commission (CySEC), the authority of the financial markets of Cyprus, and by the FCA, the Financial Conduct Authority, the authority of the British financial markets . The sums deposited on the platform are also guaranteed up to 20,000 euros. Users are therefore sure to recover the funds deposited on the site within the limit of 20,000 euros in the event of eToro’s failure. The trading platform also provides all its clients with free insurance from Lloyd’s of London, which covers losses suffered in the event of insolvency up to a limit of one million euros, against payment of a deductible.

However, the fact that the site is serious does not prevent the risk of loss of money are very important. The broker states on its site that “67% of retail investor accounts lose money when trading CFDs with this provider”. However, eToro takes a number of steps to limit the risk to its customers. During registration, the Internet user is submitted to a questionnaire to assess his trading skills. Depending on its answers, eToro may decide to limit some of its activities, including investing in riskier assets. The site also offers several educational resources, analyses, guides to the financial markets, in order to support traders. And these can train on a virtual account.

eToro and taxes, how does it work?

The sums earned on the platform must be declared to taxes when preparing their tax return. eToro specifies in its general conditions that the company does not collect or pay any tax on income earned or lost by investors: the latter must declare all these elements themselves to the tax authorities. First you have to do total winnings and losses for the year in order to obtain the net balance. If the trading activity shows a net loss, it is possible to declare it. Indeed, if it cannot be deducted from the overall income, it is possible to set it off against capital gains of the same nature for the following ten years.

Financial assets are subject to a flat tax of 12.8%, called a single flat tax or flat tax. However, it is possible to prefer the application of the progressive scale of income tax. For this, you have to make an express request. We must add the CSG, the CRDS and social security contributions, amounting to 17.2%.

eToro does not offer a PEA-type securities account, it is not possible to benefit from the tax relief to which this type of product gives rise. The trader must declare what he has won or lost, even if the sums are still in the eToro account and have not been transferred to his bank account.

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