When you reach a certain age in your lifetime you start thinking about your financial well being. I reached that threshold a year ago when I was 25-years-old. When you reach that milestone you start to think about investments and what do you do? That’s right you open up your laptop and start your research. That’s exactly what I did, I did my research as best as I could and I started asking my friends and colleagues where do they invest their money and that’s pretty much how I stumbled upon eToro.
Every experienced investor always says – Don’t put all your eggs in one basket.
Meaning – don’t invest all your funds in one place. I’m trying to live by that advice.
I diversified my investment among many places – eToro, Crypto, Stock, P2P lending, Pension. That’s another story for another blog post.
What is eToro?
eToro is a social trading and investment platform.
You can trade and invest in stocks, ETFs, currencies, cryptocurrencies etc. The most attractive feature eToro has is Copytrading. Copytrading is pretty simple – Choose the traders you want to copy(do your research), decide on the amount you wish to invest($200 is the minimum), and copy everything they do automatically, and in real-time, with one click of a button.
How to copy Traders?
You’ll need at least $200 to get started with copy trading or any kind of trading for that matter at etoro. Click on “Copy People” find a person you want to copy and just click the big blue “copy” button. Allocate some funds (you need to allocate at least $200) and you’ll start copying every action made by that trader. You’ll be offered a choice – to copy his open trades already, I would advise against that.
How to choose Traders?
Everyone wants to select the best traders, but how do you do it?
Most people will still want to start looking at the “most copied traders”. To get this view, select “Advance search” at the top, right corner then select “copiers” then select the minimums – 500 and above, this way you will get all the traders that have at least 500 copiers. You can also search Traders by AUM (Assets Under Management).
Popularity is obviously a decent “starting” point for finding traders to analyze further but by no means will just copying the “Most Copied” or “Highest AUM” traders be a recipe for long term success. There have been several examples in the past of top traders who lost their account balance (and hence their copiers’ allocation). So putting in some time and effort to analyze the additional statistics is likely to lead to better long term results.
So what else should I search for?
When analyzing a trader it is also useful to look at the Traders table in their eToro profile. A steady increase without large sudden drops is the sign of a consistent “Professional Investor”. A sudden drop in a table, on the other hand, is normally the sign of some inexperience or poor trading activity.
When I started I didn’t check any of these metrics and suffered some equity loss as you can tell from the first picture.
Becoming a Trader
As I already mentioned I’m not a trader, I was just looking for a place to invest without speculation. But in case if you’re thinking about becoming a trader and trade on eToro then you should know – Traders can enjoy additional profits by becoming a popular investor/trader where they can get a 2% management fee. If you’re a skilled trader, this is definitely I would recommend. These payments are in addition to any profits made from their own trading.
It’s also important to know eToro Fees.
The main question of the blog – is it worth it? I guess it depends on your goals. You can already see that I’ve only lost and most of the investors lose their money, in my specific case I copied two traders and I didn’t do good research and one of the traders lost around 20% of the equity. It’s a good thing I only invest a small amount of my equity in him. If I would have invested all of my equity in the profitable traders I would have gained around 10% profit but in overall I made a bad investment.
The most important conclusion after this experience I gained was to investigate the traders before you start copying them. That’s exactly what I suggest to anyone who reads my blog – Do your own research. It doesn’t take much of an effort, to be honest, so try to make the most out of it.
If you’re looking to make 100%-200% per year, then I would lower your expectations. I’m not saying it’s not possible, because if you check some of the trader’s history you’ll find a couple who have made 100% profit per year.
I’m personally looking for 20% profit per year, unfortunately, for now, it hasn’t paid off due to my own mistake, but let’s hope 2019 will be the year my numbers will change.
I’m not a certified financial planner/advisor nor a certified financial analyst nor an economist nor a CPA nor an accountant nor a lawyer. I’m not a finance professional through formal education. I’m just sharing my personal experience, so do your own diligence and only invest money you can afford to lose.
I hope the blog post was useful and if you got any additional questions drop a line below.
Have a great one.