eToro & Social Trading - How Does It Work?

Imagine if you could mirror the trading activity of successful and experienced investors. What would your returns look like? Fintech company eToro is a social trading network allowing investors to do just that.

Social trading networks operate similarly to traditional social media networks, except instead of sharing photos of your latest snazzy meal or holiday, users share their latest trades and results.

Social trading platforms allow investors to observe the trading behaviour of their peers and experienced traders, and in some cases emulate their strategies. Powered by a community of millions, eToro allows users to trade with transparency of their peer’s portfolios.

How does eToro work?

eToro has been around for more than a decade and claims to be the world’s leading social trading network with over 6 million users in 140 countries, including Australia.

eToro’s news feed enables users to receive updates from other investors. Users can post information, explain an investment decision, or share any other kind of relevant knowledge with their followers. With eToro you can trade over 2,000 different financial assets such as stocks, forex, CFDs and cryptocurrencies.

Tools available through eToro

The platform also offers various trading tools and courses for investors who are just starting out. Every trader that signs up to eToro is given the opportunity to practice their strategies with $100,000 of virtual money. This can be a great way for some investors to ease into investing and build their confidence.

Other tools include the CopyTrader and CopyPortfolio which allow users to reproduce the strategies of more experienced investors. Investors who are ‘copied’ can also apply to join eToro’s Popular Investor program, which rewards investors for allowing their portfolio and trades to be copied.

Compare Online Share Trading Accounts with Canstar

If you’re comparing online share trading companies, the comparison table below displays some of the companies available on Canstar’s database with links to providers’ websites. The information displayed is based on an average of six trades per month. Please note the table is sorted by Star Rating (highest to lowest), followed by provider name (alphabetical). Consider the Target Market Determination (TMD) before making a purchase decision. Contact the product issuer directly for a copy of the TMD. Use Canstar’s Online Share Trading comparison selector to view a wider range of online share trading companies. Canstar may earn a fee for referrals.

Provider	Star rating^{^^}	Fee for $15K trade^{^}	Ongoing fees^#
		$0	N/A
		$8.25	N/A
		$15.00	N/A
		$15.00	N/A

View all Canstar rated Online Share Trading products. View Disclosures.

^^ Star ratings are awarded by research analysts based on an evaluation of price and features
^ Online brokerage fee for a $15,000 trade based on the number of transactions specified in the search inputs
# Ongoing fee for the account. There may be waivers or discounts subject to account use

eToro fees

Before deciding if opening an eToro account is right for you, you should familiarise yourself with the fees they charge. Not all fees will apply to all investors and fees will depend on what you are trading. eToro does not charge any account opening fees or or management fees, but there are others few that you could incur, including:

Withdrawal fee $5
Spread – will depend on the asset you are trading. For example, the fee for stocks is 0.09%
Conversions fees

Also, it’s worth bearing in mind is that eToro only operates in US$, so you’ll need to consider the rate of currency conversion, as currency rates fluctuate so will your returns. They also charge an inactivity fee of $10 per month, if you haven’t logged in for 12 months or more.

Fees can eat away at your returns, so it is always best to compare the fees of competitors to decipher if you’re getting a good deal.

Is eToro safe?

eToro is regulated by the Australia Securities and Investment Commission (ASIC) and holds an Australian Financial Services License (AFSL). So, while you should be in safe hands when using the platform, you should also consider the risks involved with trading certain assets. For example, through eToro investors can trade cryptocurrencies, forex and CFDs which are all considered to be high-risk investments. Before investing, consider your own personal circumstances, your investment goals and risk tolerance.

Cover image: Happygi / Shutterstock.com

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Marissa Hayden

Content Producer

Marissa was the Content Producer for the Wealth team at Canstar, and specialised in investment content. She enjoys simplifying complex financial concepts and jargon for the ‘everyday’ Australian investor. Follow Canstar Investor Hub on Facebook.