Hello Internet people, in this article I’ll explain all the different Etoro fees and I’ll show you an example of 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 to you the Etoro fees. And you can click on this link to get to eToro.
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.
I just want to 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 from time to time.
- Withdrawal Fee
- Currency Conversion Fee
- Spread Fees
- Overnight Fees
- Inactivity Fees
- Etoro Fees Calculator
- The conclusion to Etoro fees
Etoro Withdrawal Fee
The easiest fee to grasp is the withdrawal fee of $5, 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, the conversion fee is calculated in pips.
And the amounts depend on the currency, but in general there is no separate credit card.
Let’s say you’ve just found 1000 pounds laying on the ground – yeah cause that could happen to anyone.
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 a $5 fee.
If you would do the same with Euros you would also pay $5 dollars in conversions fees.
Okay to make things a bit more complicated, there are different conversion fees depending on your deposit method. So the cheapest will be to choose wire transfer.
So just click on the “Deposit Funds” button, and choose wire transfer in the dropdown. Make sure you select the currency your money is in. Just know that wire transfers take from 4-7 days to appear on your account.
As you can see, for pounds it doesn’t matter if you use wire transfer or other methods, but for most other currencies, it might be good to wait extra days to get it cheaper.
What’s important to realize is that this will also apply when you withdraw money.
Please note! You don’t need to worry about the fees below if you are just copy trading because copy traders will handle everything for you. Meaning when you see profits on your account, that’s what you are going to get. (Minus withdrawal & currency conversion fees.)
Since late 2019, eToro doesn’t have spread fees anymore, however, this only applies when you are buying unleveraged stocks.
In summary, 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.
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%.
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 buy 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.
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.
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 an 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 fee.
- 1.55% is 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.
If you don’t log in for 12 months to your account, you will be charged a monthly inactivity fee of $10 per month. Until you ran out of balance or your login.
So don’t forget to login from 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.
- The conversion rate from pound to US dollar is just over 82 cents.
- The opposite conversion rate is just over 1 dollar and 22 cents.
- The conversion fee is 50 pips or 0.005
- Stock will go up by 10%
- The 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.
Alright, at the top you can see we have invested 1000 pounds.
When we convert it to dollars, we end up with $1219.41.
Right, from the start we are going to have $5 dollars in conversion fees.
So we are left with $1213.41, which we take and buy stocks with the whole amount.
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 $121 and which means we have now $1335 in total. And we’ve decided to cash in.
Just before the money is sent to your account, there will be a withdrawal fee of $5.
And another conversion fee when we convert from dollars to pounds which is just under 7 dollars.
Conclusion to calculation
When we convert the $1324 back to pounds, you can see that we are left with 1086 pounds. However without fees, we would have 1100 pounds. That means there were almost 14 pounds of fees. Which is 14% of our profits.
Fees really depend on the initial amount and stock gains.
Now the fees get smaller in proportion when you invest more money or your stocks go higher up in price.
but with 5000 pounds it would be 11% out of profits. So it really depends on how much you invest.
Or if the stock went up by 20% even with 1000 pounds, the fees would be 7% out of profits.
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 should not base your investing decisions on the calculator.
The conclusion to Etoro fees
I personally think eToro is definitely not the cheapest platform. But they have heavily reduced their fee structure in late 2019 and I’m a big fan of the social aspect of the platform. Also it’s super easy to use (compared to some other options.)
If you choose to go with eToro, I would appreciate if you could use this link to eToro, as they will pay me a commission if you sign up through me. Thanks!
Besides eToro, I’m using other platforms to trade stocks and are a bit cheaper. However, the biggest advantage I see with eToro is copy trading. It’s so easy to set up and you start making a bit extra money.