Thoughts on eToro

TheBunting

What are people's thoughts on eToro. It seems so simple that you can invest $100 and copy a top traders moves to gain growth without doing any real work. I know this means taking losses with them too, but there are some legit users that have impressive gain every single month. Is this too good to be true? Would like to hear from people with more knowledge on this platform, even personal experience?

Thanks :beer:

masonic

Seems like they are loading the bid/offer spread in order to make their money, so you will buy at a higher price and sell at a lower price than you would on the market. I don't see what advantage this has over picking funds (where a fund manager does all the trading for you).

TheBunting

masonic wrote: »

Seems like they are loading the bid/offer spread in order to make their money, so you will buy at a higher price and sell at a lower price than you would on the market. I don't see what advantage this has over picking funds (where a fund manager does all the trading for you).

The only advantage I see is the fact you can easily copy people's moves that are consistently gaining, make money off their work. Where else is it that easy to do so?

masonic

TheBunting wrote: »

The only advantage I see is the fact you can easily copy people's moves that are consistently gaining, make money off their work. Where else is it that easy to do so?

You can track their past performance, sure, but you can do that with fund managers as well (check out Trustnet.com). The charges for eToro are pretty opaque - any idea how much you'll pay? There are funds that can be held for less than 1% all in.

jimjames

TheBunting wrote: »

What are people's thoughts on eToro. It seems so simple that you can invest $100 and copy a top traders moves to gain growth without doing any real work. I know this means taking losses with them too, but there are some legit users that have impressive gain every single month. Is this too good to be true? Would like to hear from people with more knowledge on this platform, even personal experience?

Thanks :beer:

How do you know the people making money? Just because they claim to do so?

TheBunting

jimjames wrote: »

How do you know the people making money? Just because they claim to do so?

No your allowed to follow every trade they make and it shows you a performance chart oh how they are doing on a monthly/weekly basis. Your allowed to "copy people" by investing at least $100 into mirroring their actions. There are plenty people that make gain every single month and obviously people with more sporadic performances. I quite like it, can put in say $500 and invest it copying 2/3 different traders, so if one does perform badly there are two others to make up for it. Or if you chose wisely, all three could perform well and make you money. You also get paid for having people copy you, so if you do manual trades yourself and perform well, people will copy you and eToro reward you for it.

I think it's a good system, if I were to try it I would only try with 100 and test the water, same as I do with anything I'm not 100% on.

masonic

I had a quick look at the spreads (here). Just taking the FTSE100 spread of 300 pips (about 4.5%), that seems very expensive.

TheBunting

masonic wrote: »

I had a quick look at the spreads (here). Just taking the FTSE100 spread of 300 pips (about 4.5%), that seems very expensive.

It may be but taking the charges into account they are still making impressive gains and doing the work for you if you invest in their moves. I am new to all this which is why my knowledge on all of this is very limited. It will take time for me to get more clued up but I am not jumping into anything either.

ermine

TheBunting wrote: »

I quite like it, can put in say $500 and invest it copying 2/3 different traders, so if one does perform badly there are two others to make up for it. Or if you chose wisely, all three could perform well and make you money.

Nice instinctive handle on the value of diversification. That will serve you well in your future investing career.

Read Naseem Taleb's The Black Swan. Stock prices don't obey the central limit theorem - they aren't like normal random variations. You will have good runs for some time. And then something out of the blue will kill you. The trouble is that in adverse times people panic in synchronised ways, diversifying across fund managers (which is what you are doing) may help against individual manager error/overcockiness/fraud but doesn't help you against systematic trouble across the market they are invested in.

Black swans are trouble. The people at LTCM were all really smart guys, but they didn't foresee the Russian default. We all thought we were in the Goldilocks economy - right until we weren't in 2008/9.

Your best hope is you take the hit early. We all gotta pay our dues to learn some mistakes the hard way. High fees and bid/spreads will all make life harder.

You're also getting survivorship bias - you're having the sucesses thrust in your face, failure is a b'stard while success has many fathers. And we humans love great stories, ever since we came out of the caves - look at this list of cognitive biases that make us love a good story like the one eToro is putting your way.

Oh and good luck. You sound sold on the story so you'll do it anyway. That'll be Confirmation Bias

masonic

TheBunting wrote: »

It may be but taking the charges into account they are still making impressive gains and doing the work for you if you invest in their moves. I am new to all this which is why my knowledge on all of this is very limited. It will take time for me to get more clued up but I am not jumping into anything either.

If you have some money you can afford to lose, then by all means give it a whirl. You will probably learn something and might enjoy the thrill of the chase. If it really is as good as it seems, a small initial stake will be all you need to accumulate your fortune. If not, think of it as a price you've paid for some entertainment.

jimjames

TheBunting wrote: »

It may be but taking the charges into account they are still making impressive gains and doing the work for you if you invest in their moves. I am new to all this which is why my knowledge on all of this is very limited. It will take time for me to get more clued up but I am not jumping into anything either.

You have zero savings if your sig is to be believed. Before jumping into schemes like this you'd be well advised to have sufficient emergency funds and a diversified portfolio.