eToro Review 2023 - Pros and Cons Uncovered (2024)

eToro is primarily a CFD and forex broker. However, you can also trade real stocks, ETFsand variouscryptos. eToro also has some unique features, such as social trading (CopyTrader) and Smart Portfolios (previously called CopyPortfolios).

All non-leveraged long positions in stocks, ETFs and cryptocurrencies are traded as real assets. This means that when you buy equities, ETFs or cryptos without any leverage (i.e. leverage is set to one), you will buy real stocks, ETFs and cryptos and not CFDs.

All other positions are CFDs:

• leveraged long positions and all short positions in stocks, ETFs and cryptos
• all positions of forex, commodities and indices

So, does that mean that eToro acts like a traditional stockbroker just with zero commission when you buy stocks? The answer is no, there are some differences.

For example, it is not possible to initiate a stock transfer between eToro and another brokerage(and vice versa). This means that all positions that are opened with eToro must be closed with eToro.

Furthermore, as eToro holds stocks on behalf of its users as beneficial owners, users do not currently have voting rights for stocks held.

However, you are allowed to hold fractional shares.

We do not recommend eToro for long-term investors focusing on collecting dividends from US stocks. This is because eToro deducts the 30% default US dividend tax, rather than the – usually lower – tax treaty rate deducted by most other brokers. Instead, we suggest you check out the best discount brokers.

All of the above seemto suggest that while eToro is great for stock traders, for long-term investors it might not be the best choice. We're not sure how eToro would handle corporate events (e.g. a spin-off).

Let's pivot toeToro's CFD offering. Within CFDs, in addition to the traditional way of trading, you can

• follow and copy other traders' trading (this is CopyTrader, also called social trading)
• invest in a compiledportfolio (this is Smart Portfolios)

To learn more about CFDs, read our CFD trading tips.

Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% 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.

eToro offers a wider range of stock and ETF CFDs than its closest competitors. The number of availablecryptocurrencies to trade is excellent. Note that scalping is not allowed at eToro.

You can change the default leverage level of the products.

Changing the leverage manually is a very useful feature when you want to lower the risk of a trade. For example, instead of trading with 5:1 leverage, tradingwith only 2:1 leverage in the case of stock CFDs reduces your risk exposure significantly. Be careful with forex and CFD trading, since the pre-set leverage levels are high.

CopyTrader

eToro has two distinctive innovations, CopyTraderand Smart Portfolios.

CopyTrader is the so-called social trading feature. What is eToro really good at? Well, this is it! One by one you can copy the portfolio of traders who also trade oneToro. This might be of interest for those who don't want to manage their own money. You can browse through the profiles of other eToro traders, checking their previous performance on an annual and a monthly level. Their portfolio is public information.

Additionally, eToro also applies a risk score to each trader. There are tons of additional stats for each profile, like trades per week, average holding time, performance on charts, and you can also see their detailed profiles as well as their news feed comments. Imagine Facebook profiles, but with fewer inspirational and more market quotes.

The minimum amount you can invest in one trade is $200. While there is no extra fee for this service, spreads and overnight fees may be applied according to each opened copied position.

Disclaimer: Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.
Copy trading is a portfolio management service, provided by eToro (Europe) Ltd., which is authorized and regulated by the Cyprus Securities and Exchange Commission.

Smart Portfolios

Previously called CopyPortfolios, Smart Portfolios are a grouping of several assets, such as stocks, cryptocurrencies, ETFs, and even people, bundled together based on a predetermined theme or strategy.

• Investing in themes means, for example, investing in a portfolio of Future Payment systems, DroneTech, Renewable energy or cryptocurrencies. The Crypto Portfolio, for instance, consists of the biggest cryptocurrencies, weighted by market cap.
• Another way to invest via Smart Portfolios is to invest in a portfolio comprised of multiple "star" traders.

Disclaimer: Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.

The proportion of CFDs in the specific Smart Portfolio is clearly indicated. You can check performance and asset distribution, and read the investment strategy. Smart Portfolios are built around a theme by eToro's algorithms (using machine learning and data science) or by eToro external partners.

This might all sound a bit complicated, but at the end of the day, this means you can invest easily in a quasi-fund. The minimum amount required to invest in Thematic Market andPartner Portfoliosis $500, while forTop Trader Portfolios, the minimum is $5,000. eToro also checks your financial knowledge to determine whether Smart Portfolios is right for you.

Stocks and ETFs

If you buy stocks or ETFs without leverage, you are buying the real asset, not a CFD. Usually, this feature is not offered by other CFD and forex brokers. In that sense, eToro's selection of 17 stock markets to access is great. However, compared with stockbrokers like Saxo Bank (about 35 markets) or Interactive Brokers (80), it is poor.

Notethat if you're going short (selling a stock that you don't already have), you're always trading a CFD.

At eToro, you have access to the following 17 stock exchanges:

• Amsterdam
• NYSE
• Nasdaq
• Euronext Brussels
• Euronext Lisbon
• Frankfurt
• London
• Paris
• Madrid
• Milan
• Zurich
• Oslo
• Stockholm
• Copenhagen
• Helsinki
• Hong Kong
• Saudi Arabia

However, you can only trade the more popular stocks. For example, the number of tradable stocks on the Nasdaq with eToro is currently less than 700, which is only around 20% of the listed companies on the Nasdaq exchange.

Why would this matter toyou? If you only trade the most popular stocks, like Microsoft or Apple, you probably won't notice the lack of smaller stocks. eToro will, from time to time, make new stocks available for trading, usually in a batch.

For example, on March 30, 2020 eToro added 185 new stocks, among thema very trending one, Zoom Technologies. However, if you had to wait for eToro to add the stock, you missed the early rally in the stock.

Cryptocurrency

Not only does eToro offer 72different coinsto trade, but you also have the option to trade14 crypto crosses (like ETH/BTC) and 63 non-USD currency crosses (like LTC/AUD).

eToro offers the following methods to trade and own cryptocurrencies: Crypto CFDs, Spot crypto, Crypto exchange (eToroX) and Crypto wallet.

However, not every method is available in every country.For example, UK residents don't have access to Crypto CFDs.

The general rule of thumb with eToro is that when you go long in any virtual currency, you will own the real coin. When you go short, it is a CFD.

However,there are some country-specific rules as discussed above. For example, asa US resident, you can only go long on the real coin; trading CFDs and therefore going short on cryptocurrencies is not allowed.

Cryptocurrency pricescan fluctuate widely and arethereforenot appropriate for all investors. Trading cryptocurrencies isnot supervised by any EU regulatory framework, such as MiFID. Therefore, when using eToro's Cryptocurrencies Trading Service you are not eligible for any investor protection.

Disclaimer:Cryptoassets are highly volatile and unregulated in the UK. No consumer protection. Tax on profits may apply.

You can tradea wide variety of cryptocurrencies on eToro.Along with STORJ, BAL, GALA and LRC, traders have access to BTC, ETH, BCH, LTC, XRP, DASH, ETC, ADA, XLM, EOS, NEO, TRON, ZEC, BNB, XTZ, MIOTALINK, UNI and DOGE.Check the table below for a detailed breakdown andsome other minor virtual currencies.

See also our detailed guide onhow to buy Bitcoin on eToro.

To dig deeper, readeToro's CFD description.We would also recommend reading our article onhow to invest in Bitcoin.