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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 Trading 212 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 Trading 212 compares to DEGIRO for different criteria. Read on to get the full details.
Trading 212
The story of Trading 212 🇨🇾
Trading 212 was founded in 2004 by Ivan Ashminov and Borislav Nedialkov. It has grown to be one of the leading brokers in Europe as it offers "commission free investing" which we'll dig into the details later in the review. They have grown to roughly 2.5m users around Europe and they grew significantly during COVID as they began to offer commission-free trading. They hold over €4bn in customer assets.
Essentially they offer two options for investors. Either you sign up to the "Invest Account" which offers commission-free investing in stocks and ETFs or the "CFD Account" which is targeted for more advanced traders. We'll focus on the Trading 212 Invest account for this review.
Fees for ETFs
Trading 212 is the cheapest broker on the market for European investors. For instance, it costs nothing to buy €1,000 of the iShares Core S&P 500 ETF (IE00B5BMR087). But how do they make money then?
They encourage CFDs (which are very risky)
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. Instead, a CFD is a contract between you and Trading 212, in which you agree to exchange the difference in the price of the underlying asset between the opening and closing of the contract.
One of the main risks is their high leverage, which means that you can control a large position with a relatively small amount of capital. While leverage can amplify gains, it can also amplify losses, and investors can quickly lose more than their initial investment. Additionally, CFDs can be complex and difficult to understand, particularly if you're new to investing. Before trading in CFDs, you should carefully consider the terms of the CFD contract, including fees, margin requirements, and the potential risks and rewards. Because of these reasons, most investors lose money when trading CFDs.
Convenience
For Italian investors, you'll have to handle everything yourself. 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 Trading 212 puts the burden on you.
For Belgian investors, Trading 212 does nothing. They also do not acccept any registrations from Belgian citizens so watch out.
Setting up an account
Account openings for Trading 212 are blocked in Belgium. It's also easier to set up your account using a computer rather than your mobile phone. They also don't support business, children accounts nor joint accounts.
Safety
Trading 212 does security lending as an option for you. They lend your shares to "reputable" borrowers. In return, you receive daily interest and collateral. Note that you receive 50% of the interest earned each day that your shares are lent out. Also note that your cash which is uninvested is not protected by the European Bank Deposit guarantee scheme.
The full review
Learn more about the pros and cons of investing through Trading 212 in our extensive review.
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 accounts 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 Trading 212 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. Also in comparison to both brokers, your assets are more secure. There is no security lending whatsoever.
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 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. 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”.
Summary
In this article we highlighted the key differences between Trading 212 and DEGIRO, two brokers accessible to Europeans. Considering both Trading 212 and DEGIRO are low-cost brokers, there isn't much different between them in terms of fees. 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. The fact that Trading 212 is unavailable in Belgium is a bit strange. However both DEGIRO and Trading 212 do securities lending so there isn't much difference there. DEGIRO is a slightly easier app to use than Trading 212 as it has less powerful trading features.