Trade Republic has gained significant attention in the world of online trading and investing, thanks to its user-friendly platform and apparent cost-efficiency. However, understanding the various costs associated with trading on Trade Republic is crucial for investors seeking transparency and clarity in their financial activities. In this article, we will dissect Trade Republic's costs, compare them to other brokers, discuss the platform's revenue model, delve into the intricacies of taxes (with a focus on Belgium), explore the availability of Trade Republic in different countries, and address the challenges of ETF investing through this broker. Additionally, we will introduce an alternative, Curvo, that offers a more straightforward approach to investing.
The different costs with Trade Republic
When you invest on Trade Republic, you'll encounter several costs:
- Transaction costs: Trade Republic charges a flat fee of €1 for each transaction. This fee applies to buying or selling stocks and ETFs.
- Currency conversion costs: If you trade assets in a currency different from your account's base currency (e.g., trading US stocks with a Euro-based account), you'll incur currency conversion fees.
- Connectivity costs: Similar to other brokers, Trade Republic may charge connectivity fees for using specific exchanges or trading on international markets.
- Taxes: Taxes on capital gains, dividends, and other financial transactions are determined by your country of residence and can vary widely.
Cost of Trade Republic for ETFs
Trade Republic offers a completely "free" service for buying ETFs in their savings plan option where you buy a fixed amount every month. If you just want to buy some shares, the transaction fee of €1 applies to ETF transactions as well. This competitive pricing makes it an attractive choice for investors looking to build a diversified portfolio of ETFs without breaking the bank.
Trade Republic vs other brokers
To assess Trade Republic's cost-effectiveness, it's essential to compare its fees to those of other popular brokers in the market. While Trade Republic's €1 transaction fee is competitive, investors should also consider whether or not your broker handles all of your taxes or if you need to do some yourself. earlier we've written a comprehensive overview on how Trade Republic compares to other brokers. You can also see the fees of another popular broker, DEGIRO.
Is Trade Republic free?
Trade Republic is not entirely free. While they offer low transaction fees, they generate revenue through other means. One notable source of income for many brokers, including Trade Republic, is the practice of "payment for order flow" (PFOF). This practice involves routing customer orders to market makers who pay the broker for executing these orders. It's essential for investors to understand that PFOF can introduce potential conflicts of interest, as brokers may prioritize payment over executing the best possible trades for their customers.
In general, Trade Republic is considered a safe way to invest your funds as they are supervised by BaFin, the federal financial supervisory authority in Germany. In case of failure, up to €100,000 in cash is protected by the deposit guarantee scheme and your shares are held at the HSBC Bank custodian in Germany.
Price is not the only criteria when selecting a broker
While low costs are important, investors should not base their broker selection solely on price. Other factors, such as the platform's ease of use, available research tools, customer support, and the broker's commitment to transparency and investor education, should also be considered.
We suggest you read through our extensive review of Trade Republic as well as its pros and cons.
Trade Republic and taxes
For Belgian investors, Trade Republic does not handle any kind of tax, such as the the Belgian transaction tax, the tax on dividends and capital gains. Belgian investors are responsible for calculating and declaring these taxes in their yearly tax returns. Additionally, Belgian users must declare their Trade Republic accounts to the National Bank of Belgium and in their annual tax forms.
The challenges of ETF investing with a broker
Investing in ETFs through a broker, including Trade Republic, comes with certain challenges:
- Portfolio management: investors must actively manage their portfolio, including asset allocation, rebalancing, and staying informed about market changes.
- Tax complexity: taxes on ETF investments can be complex and vary by country. Investors must ensure they comply with tax regulations and report their earnings accurately.
- Lack of guidance: brokers typically provide execution services rather than investment advice. Investors are responsible for making informed decisions.
Curvo: the easier alternative to Trade Republic for ETF investing
We realised the difficulties of investing through brokers like Trade Republic. So our approach is different: the right investment decisions are made for you so you don't have to worry.
Rather than having to pick the right stocks or ETFs among the thousands available through these brokers, through Curvo you invest in a portfolio that is tailored to you and your goals.
Each portfolio is managed by NNEK, a Dutch investment firm licensed by the Dutch regulator (AFM). They're 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. 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.
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 and make good investing easy and accessible to all. Find out more about Curvo.
Trade Republic is a popular choice among European investors, thanks to its competitive pricing and user-friendly platform. However, investors must be aware of their business model and that they are on their own when it comes to taxes. Comparing Trade Republic to other brokers and considering factors beyond price is essential when making a decision.
Additionally, Curvo offers a simpler alternative for investors looking for a more hands-off approach to building their investment portfolios. It's crucial to stay informed and make well-informed choices when it comes to online trading and investing.
Questions you may have
In which countries can you use Trade Republic?
Trade Republic targets the European Union and is active in Germany, Austria, France, Spain, Italy, Netherlands, Belgium, Estonia, Finland, Greece, Ireland, Latvia, Lithuania, Luxembourg, Portugal, Slovakia and Slovenia.