eToro

eToro being one of the biggest (as well as controversial) names in the world, it’s no surprise that one of the most common search terms related to eToro on Google is: ”Is eToro legit?”

I have been talking to them on and off for months leading up to this post. Getting my questions about their legitimacy answered.

And to answer your question right off the bat, yes! I am going with eToro.

My experience so far has been great. From account opening, depositing, and trading. You can open an account with eToro hERE. Thereafter, you can view my profile on eToro and copy all my trades if you choose to. More on this later.

Investing in US Stocks as a Malaysian

Why eToro?

First off, I was looking for an easy to register and easy to use international broker. I started off looking for one where I can invest in the US stock market.

I currently use Hong Leong Bank to invest and I invest in two different counters – Berkshire Hathaway and Vanguard’s S&P 500. Both of which I’ve sold off and moved the cash to eToro.

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I’ve looked around and I think the next best thing people would recommend is registering with someone like TD Ameritrade or Interactive Brokers. I’m not sure about the procedure now but back then they required a US residential address for an account.

By this time, I’ve heard of eToro and like others, was really skeptical. Mainly due to their cheesy Alec Baldwin ad.

But I decided to really look into it some time in March this year.

So, in my opinion, if you as a Malaysian wants to invest in the US, you have 3 viable options – eToro, TD Ameritrade and Interactive Brokers.

I personally am going with eToro because I think it would be the place to invest with for the younger generation and I hope to see more innovation from them as we go along.

Conversing with representatives of eToro, I’ve gotten confirmation that commission-free trading is coming to Malaysia very very soon! It is limited to US stocks only though.

Fees

Update 20 May 2020:

eToro has just announced ZERO commissions for non-leveraged positions on US stocks.

Which is exactly what and how I am trading in.
This is really huge considering how much I have been charged in the past by my local broker.

I’ve created added a video towards the end of this post to show how one can purchase the underlying assets instead of CFD.

You do not get higher spread than usual and you are not paying any fees. Provided you trade WITHOUT leverage and you trade in US stocks. The only fees you’ll actually be paying is a slightly higher currency exchange rate and a withdrawal fee when you eventually withdraw your money from eToro.

For non-US stocks, you are charged based on a spread. The difference between these two prices is known as the spread. The spread is how “no commission” brokers make their money. Instead of charging a separate fee for making a trade, the cost is built into the buy and sell price of the currency pair you want to trade.

Min of 0.18% and a maximum of around 0.25% per trade.

In contrast, this is the fee charged by Hong Leong for the sale of my USD counters. Standard $25 per trade, and on top of that, another %, and stamping. As seen below.

Another one of my concerns with my previous brokers was the handling fees charged by my previous broker on dividends received.

As you can tell from the below statement, my dividends received are charged taxed, heavily. I pay a ridiculously huge amount in fees and in the end, I receive next to nothing.

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Withholding Tax for Malaysians

I’ve received confirmation from eToro that they do not charge handling fees on dividends received. The only cost to my dividends will be the different withholding taxes different countries charge.

As a Malaysian investing in the US, we are charged a 30% withholding tax on our dividends. Which is why my attitude towards investing in US stocks is more for capital gains. My portfolio and investing philosophy in the US can be found hERE.

Registration

Registration is easy compared to many other international brokers. I managed to register in 5 mins. Verified using my details including my passport in a day.

I’ve sold my US stock holdings in Hong Leong Bank and deposited my entire capital and then some into eToro.

Huge Array of Assets to Invest In

Although I plan to invest primarily in stocks, the huge variety of assets offered on eToro brought me there.

I’m looking at commodities such as gold, silver, oil. Cryptocurrencies – Bitcoin, Ethereum and the likes. And many others.

ETFs

You also have access to a wide array of ETFs around the world with eToro. One thing to note is that all ETFs are traded under CFD and the minimum amount is $500.

Starting Out

After selling off my holdings of VOO and BRK:B shares, I deposited the proceeds in eToro.

The first share I bought is Disney! The interface of eToro was extremely easy to use.

So right now, I’ll be figuring out the ins and outs of eToro and will have updates of my US stocks for everyone.

Also, for you credit cardholders chasing them points and miles. eToro allows top-up via credit cards! I am assuming that depositing to eToro via my cards would constitute online spending. Imagine $50,000 worth of points.

How to Deposit Funds as a Malaysian

Is eToro Safe?

eToro’s Regulation

I’ve had people compare eToro to Malaysia’s illegal investment schemes and all sorts of scams and shams.

Now, I know eToro isn’t regulated by our SC in Malaysia. As a matter of fact, eToro isn’t regulated by every country’s financial authority. Like every other offshore broker, they are only licensed with a few major ones. In eToro’s case – CySec (Cyprus), FCA (UK) and ASIC (Australia).

eToro in the Asia Pacific region (which includes Malaysia) is regulated under ASIC – Australia’s SC for CFD trading. I’ve confirmed with ASIC that eToro is actually regulated there.

ASIC is a top tier financial authority. They are at the top level. I know many MANY of you are worried about eToro as being not safe. But eToro is one of the few offshore brokers that belong to a Tier 1 financial authority.

In this case – ASIC. Which Malaysian accounts belong to.

As for not being licensed under SC, I know many of you are concerned by the recent article. All off shore brokers like TD and IB are not licensed under SC. It’ll be tough for an international platform to get licenses from every country whose citizens choose to invest with them. And unfortunately Malaysia isn’t that big of a market so I don’t think anyone would go through the trouble to get a license from SC for us.

I think I’m comfortable with eToro being regulated by ASIC. Even more so than SC actually.

Not Understanding the Platform

I fear that many new investors to eToro should take some time to understand the platform. First, sign up for a virtual account, give it a week or so at least and then go for the real thing.

Another potential issue is when you use leverage, so if you’re not a seasoned investor, please steer clear of leverage.

Take the time also to look at the video I’ve posted later in the article on how to purchase without leverage etc.

Stocks held under?

Investing via eToro Malaysia, your investments will be held ”in street name”.

A security is held in “street name” when a brokerage holds it on behalf of a client. The name that appears on the stock certificate is that of the broker, but the person who paid for the securities retains ownership rights.

It’s similar to a nominees account here in Malaysia.

Best Way to Deposit and Withdraw from eToro for Malaysians

I’ve had readers asking about issues with deposits and withdrawal. Ie. Taking your money out from eToro.

The first thing you have to make sure to do is to get yourself 100% verified. Submit all the necessary documents. Then you deposit.

Also, there are a few methods to deposit. I used to use BigPay and credit cards to deposit but now I stick to the good old bank transfer. I use Maybank and it is easy as hell to do.

Be advised that whatever method you use to deposit your funds, eToro will reuse the same method when you make withdrawals. Which is why I moved to bank transfers.

If you happen to encounter problems withdrawing your money, you can easily submit a help ticket and eToro will get back to you.

I myself have not had any issues with withdrawal.

Important Note.

By default, Malaysians using eToro will be under ASIC. And eToro has just recently announced the following:

eToro is excited to announce that 0% commission trading of NYSE and NASDAQ stocks on the eToro platform is now available in your region. Please note that leveraged positions, short positions, and positions on stocks traded on exchanges other than NASDAQ and NYSE will be executed as CFDs, and incur commission and relevant fees.

I am currently investing only in US stocks, non-leveraged, and under ASIC regulation. You can find my profile on eToro hERE.

Video Tutorial

I’ve created a video on how to trade on eToro without leverage. This allows eToro users in Malaysia to buy the underlying assets instead of CFD.

As such, there is no need to change to CySec regulation if you’re only buying US stocks. If you are looking to buy stocks other than US ones without CFD, you’ll have to change to CySec – which I have also included in the video.

As mentioned previously, ASIC is a Tier 1 regulator.

I DO NOT recommend people changing it to CySec. Stay with ASIC, I’d suggest just buying without leverage, and only buying US stocks. Zero fees boys and girls.

And if you want to buy stocks of other countries, just go with CFDs, I’m sure the majority of your holdings would be US stocks.

Start Investing

Signing Up

You can sign up hERE. The registration process is the seamless and easy. Next would be verification of your account and depositing funds.

Update Feb 2021 – Long Verification Process

With the huge number of sign-ups in recent months, verification of new accounts is taking longer than expected – more than a week.

A way to circumvent and bypass this is to first deposit your funds, and then verify. You’ll be verified within 48 hours.

Practice Account

If you’re unsure about investing with your own money just yet, you can sign up for a practice account first, trade with a virtual $100,000 and when you’ve familiarized yourself, continue with real money.

You can open an eToro practice account hERE.

Copying and Mirroring My Portfolio

TO ALL MY VALUED COPIERS.

I am on eToro as a popular investor. Copying is an interesting feature on eToro where everyone is free to copy someone’s portfolio and future trades.

If you choose to copy me, here are a few things to know.

I am on eToro as dividendmagic.

When you copy, you instantly trade whatever I choose to trade in. Whether it is a buy / sell position, you instantly mirror and copy it. So you don’t have to worry about any lag in between.

On eToro, I will be focusing on long term growth investing. Dividends will not be a focus because we are subject to withholding taxes. You won’t be able to see my actual portfolio value, only in % terms but I have the bulk of my investment portfolio in US stocks.

I will apply both fundamental and technical analyses. I will not be using leverage and I have a CAGR target of at least 10%.

If you are copying, do copy all open trades. If you are new to investing and/or want to be hands-off, you can copy 100%. I will do all the work.

Most people choose to place 50% or more in copying me. I’d also recommend a minimum copy amount of at least $500. And remember that you’re copying for the long term (>2 years).

As always, onwards and upwards and I will continue to procure long-term gains for everyone onboard. And most of all, thank you for trusting me and let’s look forward to the next 20 years of gains together.

End.

Now, I must make it clear that I am using eToro to invest for the long term. I do not plan to trade in CFDs (except maybe for a few China and HK stocks) now that we can purchase the underlying stock instead. And I do not plan to use leverage.

If you are still unsure how to do the above, please take a moment to go through the video I’ve posted above.

I’d like to emphasize that I am not here to represent or defend eToro. I am just sharing what I am using to invest in the US markets. Of course I’d be more than happy to help with any questions you may have.

Finally taking the Freedom Fund international, seriously. Let’s see where global stock investing and eToro will take the portfolio!

You can also check out my US holdings and portfolio hERE.