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Choosing a broker is an important step when investing. There are many different options available, so picking the right one for you is challenging. We compare investing in ETFs through eToro and DEGIRO, two brokers available to European investors. The goal of this article is to help you find out which broker is best for you for investing in ETFs. We’ll compare the brokers based on their fees, convenience, the ease of setting up an account and importantly the safety of your assets.
The overview
The table shows an overview of how eToro compares to DEGIRO for different criteria. Read on to get the full details!
eToro
Story of eToro 🇮🇱
eToro was founded in 2007 in Tel Aviv. They've grown to 30 million users around the world by giving their customers easy access the stock market. Do note that there's "only" 2.6 million users with money in their account so the number is quite inflated. eToro has been at the forefront of the movement to make investing more "mainstream", as shown through their adverts featuring Alec Baldwin. One of the unique features of eToro is its CopyTrader function, which allows users to automatically replicate the trades of successful traders on the platform. This feature is particularly useful for novice investors who may not have the experience or knowledge to make their own investment decisions. Additionally, eToro offers a social feed where you can interact with your friends, share ideas, and discuss investment strategies. They were one of the first brokers to pioneer "social investing".
Fees for ETFs
eToro has a limited selection in comparison with other brokers. They only offer 263 ETFs to purchase. Buying €1,000 of the popular IWDA ETF will cost €0 in transaction fees. However, keep note of the currency exchange fee you'll be paying. Note that you can't actually purchase IWDA but you get the same fund with an alternative ticker SWDA. Even though you're most likely going to use eToro from the Belgium (or in the EU) if you're reading this, their entire app is in USD. This is where eToro makes the bulk of their revenue from! The conversions between € and USD are core to their business model. For example, if you deposit via a bank transfer, you'll pay 0.5% exchange rate costs. If you deposit via Paypal or Sofort, you'll end up paying a 1.5% exchange rate cost.
Convenience
eToro allows setting up recurring deposits, but investments must be made manually. They offer the ability to purchase fractional shares, facilitating euro-cost averaging strategies, particularly beneficial for investing smaller amounts periodically. However, eToro requires users to handle their own tax obligations irrespective of which European country you're using the app from. For example, in Italy, it's a declarative regime. For Belgian investors, you have to handle the Belgian transaction tax yourself, dividend tax, and Reynders tax on ETF profits, as well as declaring the account to the National Bank of Belgium annually, as eToro does not provide assistance in these areas.
Setting up an account
Setting up an eToro account is fast and user-friendly, requiring only an email for initial access, with full account creation necessitating ID and proof of address, typically approved within a few hours. eToro offers the convenience of signing up through both web and mobile platforms including the option to use Facebook or Google for registration. However, the app's design feels somewhat outdated, and its interface can be overwhelming with information, especially for buy-and-hold ETF investors. eToro does not offer children or joint accounts, though joint configurations for deposits are possible. You can create a business account on eToro but the minimum deposit is $50,000.
Safety
eToro is regulated by multiple entities including the Cyprus Securities Exchange Commission (CySEC), the FCA in the UK, and the SEC in the United States, with its headquarters in Israel. They have faced regulatory issues, including being banned in India, fined €1.3 million in Italy for misleading advertising, and fined in Canada for operating without registration. While eToro's EU operations based in Cyprus offer €20,000 protection under the European investor protection scheme, cash is not protected by the €100,000 deposit guarantee scheme. Additionally, eToro participates in securities lending and engages in payment for order flow (PFOF) in the United States, with unclear practices for European clients.
The full review
We wrote an extensive review of eToro if you wish to dig deeper on their offer.
DEGIRO
Story of DEGIRO 🇳🇱🇩🇪
The founders of DEGIRO were former employees of BinckBank. They founded the company originally in 2008 and originally focused on professional investors. However, they started to reach success once they launched their online trading platform in 2013. They quickly grew across the European Union and now serve more than 2.5 million customers which makes it one of the largest brokers.
DEGIRO is now part of the German Flatex bank. It has thousands of ETFs and stocks to choose from and it’s one of the brokers on the market that offers the best value. Like many brokers, they started with stocks, but you can now also trade commodities and make margin calls.
Fees for ETFs
Essentially, DEGIRO charges two types of fees:
- transaction fees
- connectivity fees
The transaction fee depends on the inclusion of the ETF in their core selection. For those ETFs, the transaction fee consists only of a €1.00 handling fee, instead of €3.00 for ETFs not in the core selection. There's a caveat though: you need to buy the ETF on the right exchange. ETFs are traded on stock exchanges. Famous ones are the New York Stock Exchange (NYSE) or Nasdaq, or Xetra and Euronext Amsterdam in Europe.
As an example, buying €1,000 of the popular iShares MSCI World Accumulating ETF (known as its ticker IWDA) when using the Dutch DEGIRO will cost just a €1 transaction fee when buying it Euronext Amsterdam.
A peculiarity of DEGIRO in comparison to other brokers is that they charge a connectivity fee of €2.50 per stock exchange per year. This means that you need to pay €2.50 in a given year for each stock exchange where you've purchased or sold anything.
As an investor, you have to choose which exchange to use in order to reduce the fees. DEGIRO waives the connectivity cost for the home exchanges:
- 🇳🇱 DEGIRO.nl: no fee for Euronext Amsterdam and Euronext Brussels
- 🇫🇷 DEGIRO.fr: no fee for Euronext Paris and Euronext Brussels
- 🇮🇹 DEGIRO.it: no fee for the MTA Italian exchange
DEGIRO's fee structure varies per country which can make it confusing.
Convenience
For Italian investors, you'll receive an annual tax report from DEGIRO. You'll have to manually take that date and input it into your tax reports. You'll have to declare your income, capital gains as well as the IVAFE (wealth tax). Note that you'll have to complete this manually as DEGIRO puts the burden on you as an investor and they have previously made errors in their tax reports.
For Belgian investors, the handling of the stock exchange transaction tax (TOB) is what DEGIRO sets apart from the other foreign brokers. However, you're still responsible for declaring any dividends yourself, as well as the Reynders tax. On top, you have to declare your DEGIRO account to the Belgian National Bank.
Setting up an account
Account openings for DEGIRO are quick and usually only take a day. A drawback is that DEGIRO does not use itsme, meaning that you'll have to get out your ID card or passport for identification. They also don't support business, children nor joint accounts.
Safety
DEGIRO is one of the few brokers that have had past issues with regulators, namely the Dutch regulator (AFM). They also lend out your securities, as well as receive payment for order flow, a controversial revenue model for brokers.
The full review
Learn about all the pros and cons of investing with DEGIRO in our in-depth review.
Curvo: easier than a broker
Brokers push you to trade and to pick individual companies to invest in. Rather than picking individual stocks such as Amazon or Tesla, index funds are a way to buy the whole market, across all sectors and regions of the world. Essentially, you own a small portion of thousands of companies throughout the world. Instead of betting on a particular company, you are placing a bet on the global economy.
Rather than having to pick the right stocks or ETFs among the thousands available through eToro or DEGIRO, you invest in a portfolio that is tailored to you and your goals. These portfolios are composed of globally diversified index funds, meaning you earn a piece of the growth of the global economy, and they're best suited to make the most of your savings long term. And they're secure, as they're managed by NNEK, a Dutch investment firm under supervision of the regulator in the Netherlands (AFM).
We believe that investing is an important tool for our generation to improve our financial well-being and to prepare for our future. We are building Curvo to fulfil that vision, by making good investing easy and accessible to all:
- Diversified portfolio set up for you: The best portfolio for you is built by NNEK based on your time horizon and financial goals. Simply answer a short questionnaire and you’ll get everything set up for you.
- Automated savings plans: Through Curvo’s app you can set up a monthly contribution from €50. That means that money is automatically invested for you in your portfolio. Put your savings on autopilot!
- Fractional shares: All the money you send towards your portfolio is fully invested by NNEK. No cash is left on the side.
- No TOB 🇧🇪 : Significant savings as the portfolios aren’t liable for the Belgian transaction tax (or "TOB"). This saves you between 0.12% and 1.32% for every time you buy or sell!
- Sustainable investments: Your investments focus on one guiding principle: don’t invest in companies that are considered destructive to the planet. This means that sectors like non-renewable energy, vice products, weapons and controversial companies are all excluded.
- Project yourself into the future: Through Curvo you can see how much your portfolio is expected to be worth in the future. You can answer questions like “how will increasing my monthly contribution by €50, €100 or €200 affect my long-term savings?” to give a concrete idea for the “future you”.
Learn more on how it compares to investing through a broker.
Summary
In this article we highlighted the key differences between eToro and DEGIRO, two brokers accessible to Europeans. Due to the fact that eToro has a limited number of ETFs and trades solely in US dollars with hidden fees, it's not a brokerage platform we can recommend. DEGIRO is more cost-effective than eToro if you invest in ETFs from their core selection of free ETFs. But cost is not the only factor to take in consideration when you’re putting your savings to work. For instance, you should also take into account the ease of use of the app, or the difficulty of investing your savings on a monthly basis.
We built Curvo to make good investing easy and accessible to all Europeans, and we explained its benefits. Feel free to explore Curvo's app if you wish to learn more.