eToro – Is this the Cheapest Option for South Africans to Invest Offshore? – With One caveat

The one caveat is that if you are buying ETFs, you are actually buying CFDs, so there is some additional counter-party risk and tax considerations, it is insured by Lloyds of London, which makes me comfortable. If you are okay with that, like I am, then crack on.

If you find Easy Equities options too limiting and Interactive Brokers way too complicated – then eToro could be just what you are looking for.

I signed up in about 10 minutes, it would have been 5, but I spent 5 minutes scrolling through my photos trying to find a picture of my passport, instead of just taking a new one.

Normally I would do a review of the registration process with screenshots and all, but the process was over so quickly, so they wouldn’t add much value.

Cheap, really cheap (for the vanilla investor)

They advertise 0% commission when buying stocks and ETFS. I imagine there are some fees built in to the spread, but nothing significant enough to notice for the long term investor.

eToro generates their revenue when people start leveraging and getting fancy. For most, if you just want to trade internationally listed stocks and ETFs then it is super cheap. After paying some chunky school fees in the past playing around with leveraging, I now keep my investment strategy simple.

The market can remain irrational longer than you can remain solvent.

A. Gary Shilling

Getting Cash in and Out of eToro

The easiest way to fund your account is probably through your debit or credit card.

  • $200 via FNB Fusion card – R3,886.94
  • $200 via Revolut – R3,875.01
  • $200 via EasyFX – R3,906.51

I get some eBucks back for the FNB option, but the Revolut will have a better rate during the week. I think it settles to about the same or at least close enough.

Deposit with your Credit Card
There are a few currency options

There is a minimum deposit of $200. eToro does not charge deposit or clearing fees. It does charge a flat $5 fee on all withdrawals. With the minimum withdrawal amount is $30. There is also an inactivity fee of $10 per month which kicks in after 12 months.

There is also 0.5% fee to convert from Eur/GBP/AUD to USD, so unless your card is in those currencies, it probably makes most sense to just deposit in at USD and deal with your local charges.

*Update 08/05/20 – I figured out a new hack I’m going to try, I have level 5 eBucks, so I get half my forex fees back and 4% on Foreign spend. So my using my global card, I should get 3% return off the bat.

For me, it is a Game Changer

Versus Vanguard Direct

Before this review, I assumed that the best place to get access to Vanguard ETFs would be directly through their platform. But now I’ve realised that I can save in two ways.

Firstly, on the Vanguard platform fee of 0.15%. Secondly by investing in Vanguard Total Stock Market ETF I will also saved on the ongoing fees with an expense ratio of only 0.03%, instead of 0.23% of the Vanguard All Cap. A total annual saving of 0.35%, for free. It is less globally diversified, but the world is so correlated these days, it is not going to shift my retirement date. Finding more to invest is.

Versus Interactive Brokers

To be clear. Interactive Brokers (IB) is a much better platform, like a Mercedes Benz is a better car than a Toyota Corolla. So it is really down to you, as to which provides you better value.

For me, it’s eToro. For a few reasons, firstly, it provides live data, rather than the 15 minute delay I have with IB (with my limited account), although perhaps that doesn’t have much of an impact for me, as I am primarily investing in ETFs, not trading stocks.

Secondly, the worse spreads on eToro will have minimal impact for me because an ETF has a market maker.

Thirdly, it’s free to have an account.

Fourthly, because I can fund my eToro account virtually instantly with a debit/credit card, rather than a bank transfer. This comes back to my fifth investment principleKeep it Simple – complexity creates resistance.

Funding an IB account is not as direct as eToro

Versus Easy Equities

I save on the once off 0.645% effective buying fee when purchasing and a similar fee when selling.

eToro will likely be my core investment platform going forward, at least until I hit the magical $100k mark. At which stage, perhaps I will revisit Interactive Brokers. For now though, every month, I’ll simply invest in the Vanguard Total World Stock ETF on my journey to reach Financial Independence.

*update 10/06/20 – I have settled on 55% VTI (US Stock Market) and 55% VEU (Rest of the world), mimicking VT (Total/All World).

*update 25/01/21 – In November last year, they had VT.US.

*update 31/01/21 – I’ve completely revised my investment asset allocation, given the current market conditions.

eToro full disclaimer: eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% 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.
Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.

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