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 Trade Republic and DEGIRO, two brokers available to Belgians. We also look at the difficulties of investing through a broker, and see how Curvo solves them. By the end, you'll be able to determine which option suits you best to invest your savings.
Why you shouldn't invest through your bank
For many making their first steps into the world of investing, their bank is the one-stop shop for anything related to finance. Unfortunately, they are likely not your best partner when it comes to investing.
First, they try to sell their expensive actively managed funds to you. In an active fund, the fund managers try to outsmart other investors in search for a higher return. But the European finance regulators found out that the majority of them don't succeed. On top of that, the bank charges hefty fees to invest in the fund. Good for the bank, bad for you. You're better off investing through another means.
Why a broker
Through a broker, you gain access to the financial markets, where you can buy stocks, ETFs, bonds and even some more complex products like derivatives. It's cheaper than investing in an active fund offered by a bank. Alternatively, most banks offer brokerage services. Yet again, it's the most expensive option. Specialised brokers offer a better experience at a cheaper cost.
So let's compare two such brokers available for European investors: Trade Republic and DEGIRO. We are going to see how they differ on important criteria like cost, trust, and ease of use.
Launched in 2015, the German neo-broker Trade Republic continues to grow in popularity and launched in Belgium in October 2022. You can use their service either through a mobile app or via their desktop version. Through Trade Republic you can buy over 9,500 stocks and ETFs as well as different cryptocurrencies.
Trade Republic have some of the lowest fees in Europe. Following Robinhood's model for Europe, the transaction fees are low. For example, buying an ETF on Trade Republic costs €1. If you wish to buy stocks, the price is also €1 per trade.
Learn more about the costs of investing through Trade Republic.
Automated savings plans
One of the biggest benefits of using Trade Republic is that they offer an automated savings plan option. If you wish to do periodic investing, you have the freedom to set the date of the investment and choose the stocks / ETFs that you wish to buy.
Interest paid in idle cash balances
Currently, Trade Republic is offering 4% interest on cash for all customers. This is the cash which remains uninvested in your balance on the app.
A big benefit of using Trade Republic is that you're able to buy fractions of shares. This means you can buy parts of an expensive ETF or stock. For example, at the time of writing, Microsoft's stock price is $330 meaning you could invest €100 every month into Microsoft stock and build your wealth that way. This is useful if you have lower amounts to invest periodically.
Does not handle taxes for you
They don't do a great job across the board for European countries where they've been launched. Specifically for Belgian investors, they're not the most supportive.
For Belgian investors 🇧🇪
Belgian transaction tax
You have to handle the Belgian transaction tax (also known as the TOB or “beurstaks” or “taxe boursière”). Every time you buy or sell anything, you have to pay this tax which ranges from 0.12% to 1.32%. You have to make the calculations yourself and then declare and pay it. Failure to do so may result in a hefty fine from the taxman.
Tax on dividends
As well as not declaring the Belgian transaction tax, you'll also have to declare and pay the tax on dividends (“roerende voorheffing” or “précompte mobilier”). You need to pay a 30% tax on any dividend you perceive through the stocks or ETFs that you should. You need to make sure that you calculate and declare them in your yearly tax declaration.
Tax on capital gains on bond funds (Reynders tax)
There’s a 30% tax on the profits you make when you choose to sell the bonds in your portfolio. Again, Trade Republic pushes the responsibility to you for declaring the right amounts in your tax declaration.
Declaration of your Trade Republic account to the Belgian authorities
As Trade Republic is a foreign broker, you’ll also need to declare your foreign account to the Belgian National Bank. It’s a simple enough process that you only need to do once, and it takes a couple of minutes. You'll also need to mention it every year in your tax declaration.
Learn more about all the taxes applicable to Belgian investors.
Frowned upon business model
Trade Republic has a “frowned upon” business model. They make money from selling your market orders. As written in their terms: “In connection with the execution of transactions in financial instruments, Trade Republic may receive payments from the operators of the execution venues or counterparties of the execution transactions” (see section 4.2. of their customer agreement). This system is called "payment for order flow", and the largest downside of the business model is that you may get a worse price for your trade than with other brokers.
The Dutch regulator, the AFM, conducted research on the price of Dutch stocks for PFOF and non-PFOF brokers:
The analyses found that the majority of retail client transactions on the two PFOF trading venues were executed at prices worse than transactions on the reference trading venues. On the non-PFOF trading venue, most of the retail client transactions have similar execution prices when compared to the reference trading venues.
The Spanish regulator, the CNMV, came to a similar conclusion for Spanish stocks:
It shows that for the trades executed on behalf of the PFOF broker’s clients through the PFOF TV on Spanish stocks during the first half of 2021, best execution was seldom achieved (only a 3.3% of the trades) and in most cases (86%) the prices obtained by clients were worse than the worse alternative in the group of comparable trading venues. The average price deterioration is estimated at €1.09 per €1,000 traded.
The EU has proposed a ban on Payment for Order Flow which will be implemented by 30 June 2026. However some EU jurisdictions are exempt including Germany where Trade Republic is based.
So although the commission is lower, you may end up paying more through a higher price when buying, or selling at a lower price.
Only buy through one exchange
When you place an order with Trade Republic, it is always executed on the same exchange which is the Lang & Schwarz Exchange which is part of the Hamburg Stock Exchange. Trade Republic receives a fee from this exchange for every order they send to it. It's not clear how this fee is given.
They don't offer options, futures or CFD
Contrary to similar apps like eToro which is popular for trading CFDs. A CFD, or contract for difference, is a risky type of derivative that allows you to speculate on the price movements of underlying stocks or currencies, without actually owning the underlying asset. Thankfully Trade Republic does not offer any of these options.
Customer support only through email
It's quite outdated in 2023 to only offer customer support through emails. Although they answered my query quickly (within a few hours), it would be great to have a live chat option (like Curvo offers).
Pros and cons of Trade Republic
We suggest you read through our extensive review of Trade Republic.
The founders of DEGIRO were former employees of BinckBank and launched their online trading platform in 2013. It 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.
DEGIRO is available in a wide range of European countries:
DEGIRO charges some of the lowest fees on the market. They even have a large selection of ETFs as part of their core selection that cost only €1 for each trade. IWDA, a popular ETF offered by iShares, is one of those. Every month, the first transaction of IWDA on the Euronext Amsterdam stock exchange will cost just €1. Subsequent transactions for IWDA that same month will also cost just €1 provided:
- the transaction is in the same direction (i.e. buy/sell) as the first transaction
- the value of the transaction is at least €1,000
For ETFs that are not part of the free selection, DEGIRO charges a €3 fee. Read more about the costs of investing with DEGIRO.
Handling of taxes
DEGIRO will provide you with an annual report to help you file your taxes. It's usually provided by the end of February or early March. They will also withhold tax for you automatically depending on where you are registered with an account.
For Belgian investors 🇧🇪
DEGIRO provides some comfort to Belgian investors as they handle the Belgian transaction tax (also known as the TOB or “beurstaks” or “taxe boursière”). Every time you buy or sell anything, you have to pay this tax which ranges from 0.12% to 1.32%. DEGIRO makes sure the tax is paid and declared for you.
However, they do not handle the following:
- Tax on dividends (“roerende voorheffing” or “précompte mobilier”). A 30% tax on the dividends you perceive through the shares that you hold. You need to make sure that you calculate and declare them in your yearly tax declaration.
- Tax on capital gains on bond funds (also known as the Reynders tax). There’s a 30% tax on the profits you make when you choose to sell the bonds in your portfolio. Again, DEGIRO pushes the responsibility to you for declaring the right amounts in your tax declaration.
You also have to declare your DEGIRO account to the Belgian National Bank as DEGIRO is a foreign broker.
Depending on the makeup of your portfolio, taxes are an important consideration to take in mind when choosing a broker. They're an administrative burden that take time and effort. Failing to pay or declare a tax can also lead to a costly fine. We’ve written extensively about taxes Belgian investors should know if you wish to dig deeper into the topic.
Issues with the Dutch regulator
Throughout its existence, DEGIRO has had numerous run-ins with the AFM, the Dutch regulator for the finance industry. For example, they were fined in 2018 because they did not implement an adequate policy for conducting their business with integrity. As we’re dealing with our long-term savings, safety and trust is vital.
You can only buy whole shares
A popular investment strategy is euro-cost averaging, where you invest periodically instead of investing large lump sums in one go. You invest at fixed times, for instance every month, regardless of how the markets are performing. Most people are paid monthly, so it makes sense for their investments to follow the same pattern.
Unfortunately you can’t buy fractional shares with DEGIRO. This means you need to buy whole units. Following a euro-cost averaging strategy can then become tedious and expensive.
Let’s take the IWDA ETF as an example again. At the time of writing, it’s sold at €71.12. If you contribute €200 towards your savings, you’re only able to buy 2 whole units for €142.24. The rest of the money is sitting on a cash account not working for you. Due to this, many investors have lots of cash sitting around waiting to be invested.
Learn about all the pros and cons of investing with DEGIRO in our in-depth review.
The easier way: Curvo
When you choose a broker, you then have to figure out what to buy, when to buy, understand the tax implications of your decisions, rebalance your investments and make sure they stay in line with your goals and risk tolerance.
We realised the difficulties of investing through brokers like Trade Republic and DEGIRO. That's why we created Curvo: the right investment decisions are made for you so you don't have to worry.
Based on index investing
We are convinced index investing through ETFs are the best way for most people to invest and grow their savings. 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.
There are many benefits to index investing:
- Low-cost. ETFs and index funds are inexpensive to run and are therefore cheap for investors.
- Diversified. One of the goals of index investing is to diversify as much as possible. By diversifying across many countries and sectors, you eliminate unnecessary risk.
- Rooted in the real economy. Most index funds and ETFs invest either in stocks or bonds. Those are backed by real companies, with real factories, employees, intellectual property, and so on. This is unlike, for example, the crypto industry, where the value of a currency or token is mostly determined by its potential rather than by concrete applications.
- Start investing with low amounts. You don't need a large sum upfront to start investing in ETFs, making it accessible to anyone (for instance for young people).
The challenges of investing through a broker
You can invest in ETFs through a broker. But that comes with challenges:
- The allocation of your portfolio is in your hands: you need to figure out how to build the right allocation that meets your long-term goals.
- You need to do your own homework: figuring out how to start and understanding the intricacies of investing in ETFs takes an effort. Yet it's important, because in investing the devil is often in the details.
- It takes time: send money to your broker monthly and then make the purchases.
- Costly for monthly contributions: if you wish to invest on a monthly basis, you’ll have to pay a lot in broker fees. Also, as you buy units and can’t buy fractions, you’ll always be left with cash on your account.
- Learn how to rebalance: if you have multiple funds in your portfolio, how will you rebalance? Quarterly or yearly? How do you decide?
- Keep track of your portfolio: you may have to set up a spreadsheet to stay on top of things!
- Understand taxes: this can be complicated and they also often change.
- Discipline: it requires self-confidence and discipline to stay the course.
- Brokers want you to trade: the majority of brokers make money on you trading. So as a buy-and-holders, you are not a good customer to them.
Curvo solves all the complexities of good investing
Rather than having to pick the right stocks or ETFs among the thousands available through these brokers, with Curvo 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 are managed by NNEK, a Dutch investment firm licensed by the Dutch regulator (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.
👍 Pros of Curvo
- Diversified portfolio set up for you: the best portfolio for you is built based on your time horizon and financial goals. Simply answer a short questionnaire and you’ll get everything set up for you. The point is that you don't need to decide which ETFs to buy. Each portfolio is managed by NNEK, a Dutch investment firm supervised by the Dutch regulator (AFM).
- 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 everything on autopilot.
- Fractional shares: all the money you send towards your portfolio is fully invested. No need to leave the cash on the side, everything is invested for you.
- 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.
- Withdraw at any time: there’s no long-term contract or exit fees if you wish to stop investing.
- 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”.
- Business model aligned with your goals: brokers want you to trade, yet buy-and-hold works best for most people.
👎 Downsides of Curvo
- Price: It’s more expensive than investing yourself through a broker. As you pay a yearly fee on your assets, it’s more expensive in the long run than managing the investments yourself.
- You can’t choose what to invest in: Each portfolio is tailored to you and invests in over 7,500 companies. But you can’t select the stocks or particular ETFs that you want to invest in.
We have successfully launched the app in Belgium and are now expanding across the EU. Download the app to be added to the waitlist for your country and be notified when we're available.
Comparison of Trade Republic vs DEGIRO vs Curvo
In this article we highlighted the key differences between Trade Republic and DEGIRO, two foreign brokers accessible to Europeans. Due to the fact that Trade Republic has a frowned upon business model, DEGIRO may be a better option long-term 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 and their help with taxes.
We also highlighted the challenges of investing yourself through a broker. 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.
Questions you may have
Is Trade Republic trustworthy?
Yes. Trade Republic supervised by the German regulator BaFin. Uninvested money is also protected by the German Deposit Gurantee scheme up to €100,000. However, as mentioned above, it has a frowned upon business model which "payment through order flow" that may be banned in Europe in the near future.
What is the alternative to DEGIRO in Europe?
There are many broker alternatives to DEGIRO available across the EU:
We have a resource that specifically looks at alternatives in more detail for ETF investors.