Etoro Fees Explained: Complete Guide + Calculator (2018)

etoro fees explained

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Hello Internet people, in this article I’ll explain all the different Etoro fees and I’ll show you an example what happens when you invest 1000 pounds and how the fees can eat up your profit, so invest with care!

Below is a video about that will explain you the Etoro fees.

 

I want to thank Reviver for suggesting this topic. If you have video ideas let me know, it’s always great to get these for inspiration.

youtube request

 

I just want mention that all this information and calculations are just for reference and based on my opinion. you should always check eToro’s fees page as these change time to time.

 

CONTENTS

Etoro Withdrawal Fee

The easiest fee to grasp is the withdrawal fee of $25, which is charged every time you withdraw your money. So it just makes sense to withdraw large sums of money at once.

Currency Conversion Fee

Etoro operates with dollars only, so when you deposit money from other currencies, they take a conversion fee.

Just to confuse all the newbies, conversion fee is calculate in pips. mini pip

And the amounts depends on the currency, but in general there is no separate credit card.

 

For example:

Let’s say you’ve just found 1000 pounds laying on the ground – yeah cause that could happen to anyone.

you found 1000 pounds

Now you deposit that money at 1.3294 GBP/USD conversion rate.

So for 1 pound you get 1.3294 dollars.

If there was no fees on while converting your 1000 pounds, you would have about $1329.

 

On Etoro the fee for GBP/USD is 50 pips or in other words 0.0050 or 0.5%.

If you want to learn more about what pip is check it out on investopedia. But all you have to know is that one pip for GBP/USD or EUR/USD is 0.0001

 

We take the conversion rate and subtract the 50 pips

1.3294 – 0.0050 = 1.3244

This means after the fees you would have $1324 which means there is $5 fee.

If you would do the same with Euros you would pay $25 dollars in conversions fees.

 

What’s important to realize is that this will also apply when you withdraw money.

 

Please note! You don’t need to worry about below fees if you are just copy trading

copy trading

Spread Fees

Spread fees are charged when you buy anything on eToro, stocks, cryptos, and so on, however they are included in the buying price that you see in eToro.

etoro spread fee

And it’s really specific to what you want to trade.

Commodities and currencies are in pips. Whereas stock and crypto coins are in percentage.

 

Let’s assume you are buying Apple stock, the spread fee for stocks is 0.09%.

apple stock

So let’s say, to buy one Apple stock you need $191,77.

And to sell at $191,41.

This means that the real price is somewhere in the middle, roughly 191.60.

 

If you are selling (shorting) you get this by $191.41*0.0009 = $0.1723.

And if you are buying $191.77*0.0009 = $0.1726.

So it’s the stock price times 0.09% and you get the spread fee.

 

So if you would by 1 apple share, you would pay about $0.17 in spread fees. If you buy 5 shares, you pay almost a dollar. I think you get the point.

 

Overnight Fees

Like most other trading platforms, eToro charges also overnight fees, which is basically a small fee for them to lend you the money to hold the item overnight.

etoro overnight fees

This again really depends on what you are trading, for example if you trade stocks and you don’t leverage them then there are no overnight fees. If you do leverage, it means eToro is lending you money so they are collecting interest rate on it.

Here is the list of the overnight fees for stocks. By the way this is only for leveraged and short positions.

 

Example of overnight fees:

$1,000 investment in a US stock
USD LIBOR 1 month = 1.55%

Daily fee for BUY position =
(6.4%+1.55%)/365 * $1,000 = $0.22

Daily fee for SELL position =
(2.9%+1.55%)/365 * $1,000 = $0.12

So the overnight fee for US stock is 22 cents per day on Buy and 12 cents per day on SELL.

 

Let’s break down the BUY position. So you can understand what’s going on.

  • 6.4% is the etoro free.
  • 1.55% is the USD Libor for 1 month

You are probably wondering what the heck is Libor?

Well it stands for London InterBank Offered Rate.

This is the interest rate at which banks borrow money to each other internationally.  And it’s one of the benchmark rates that indicates how much it costs to banks to borrow money.

And it is constantly changing so you have to look it up when you do the calculation

  • 365 is the number of days in a year.
  • And $1000 is the investment.

So in this case you end up paying $22 cents for a day.

 

And keep in mind that overnight fees are applied to the borrowed amount. So if you have 1000$ and you leverage that by x3, which means you have $3000. The fee is applied to the $2000 you borrowed.

 

Inactivity Fees

If you don’t log in for 12 months to your account, you will be charged monthly inactivity fee of $10 per month. Until you ran out of balance or your login.

So don’t forget to login time to time.

 

Etoro Fees Calculator

Okay, let’s take a look at an example with the most common fees put together.

You can download the Etoro fee excel calculator.

Here are the conditions I’ve set for this example.

  • Conversion rate from pound to US dollar is just over 75 cents.
  • The opposite conversion rate is just over 1 dollar and 30 cents.
  • Conversion fee is 50 pips or 0.005
  • Stock will go up by 10%
  • Spread fee is 0.09%
  • No leverage applied

For simplicity, I won’t include overnight fees as these are mostly in place when you leverage your trade and for most people it won’t apply.

etoro fee calculator

 

Alright, at top you can see we have invested 1000 pounds.

When we convert it to dollars, we end up with $1329.

Right, from the start we are going to have $5 dollars in conversion fees.

 

So we are left with $1324, which we take and buy stocks with the whole amount.

While buying there will be a spread fee of 0.09% applied on the price, so there is about $1.19 in spread fees.

 

Now we’ve waited for a month and it happens to be that we’ve chosen the right stock and it goes up by 10%. In this case, we’ve just made a bit more than $130 and which means we have now $1456 in total. And we’ve decide to cash in.

We close the trade and there will be a spread fee of $1.31.

Just before the money is sent to your account, there will be a withdrawal fee of $25.

And another conversion fee when we convert from dollars to pounds which is just over 7 dollars.

Opportunity Cost

The next line is something that I call opportunity cost, there is probably a correct term, but I couldn’t find it. So if you know it, let me know below in comments.

 

In summary, it’s the interest rate on the money we lost to fees.

If there was no fees, you would have had a bit more money when stock increased in price and that small difference would have given you a bit more money.

In other words, if there was no fees, you would have used $1329 that was directly from the currency conversion, when the stock rose by 10%, you would have had $1461, which is $5,90 more than we have in above example. This means, we are missing out on the 10% interest on that amount due to fees.

 

Conclusion to calculation

When we convert the $1421 back to pounds, you can see that we are left with 1069 pounds. However without fees, we would have 1100 pounds. That means there was almost 31 pounds of fees.

Fees depend on amount and stock gains.

Now the fees get smaller in proportion, when you invest more money or your stocks go higher up in price.

For example, if you have 5000 pounds, then you pay 79 pounds in fees, which is about 16%.

Or if stocks go up by 20% then you pay 32 pounds in fees, which is 16%.

 

You can download this excel calculator, so you can play around with it. Just keep in mind it’s just for indication and based on my opinion. You shouldn’t base your investing decisions on the calculator.

 

Conclusion to Etoro fees

I personally think eToro is definitely not the cheapest platform. I’m using other platforms to trade stocks and are much cheaper. However biggest advantage I see with eToro is the copy trading. It’s so easy to set up and you start making a bit extra money.

If you like to be more hands on and control all the trades then you should check out other platforms, where you have more control and less fees.

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