eToro vs Plus500: which is better?

Both eToro and Plus500 are two of the most heavily advertised trading companies online. But they are are very different. Plus500 is a CFD trading platform. Where as eToro offers real stock trading.

I've used both platforms with real money and personally I prefer eToro vs Plus500 and in this post I'll explain why:

What I like about eToro

  • Invest in Real Stocks – On eToro you can buy real stocks (not just CFDs). This means you own the underlying asset. You can hold it for as long as you want and you don't get charged any ongoing fees.
  • Fractional Shares – eToro supports fractional share investing. This means you can buy part of a share with as little as $50. This is great for building a diversified portfolio of numerous stocks and ETFs.
  • Trade Stocks without Commissions – Probably the best feature on eToro is the commission free trading on real stocks. You can buy U.S stocks like Apple, Alphabet, Tesla, Netflix etc with no commissions.

What to be aware of on eToro:

  • You can Trade CFDs – I recommend most people should stick to just trading real stocks on eToro. But it is possible to open CFD positions (such as a short position). These are much more complex financial instruments. eToro will warn you if you're opening a CFD trade.
  • FX Fee – When you deposit funds on eToro, you AUD gets converted into USD so you can trade shares like Apple and Tesla which are listed on U.S exchanges. eToro charges an FX fee which is round about what most trading platforms charge. It's cheaper than the bank FX rates and you'll still save a fortune on brokerage fees compared to a broker like Commsec. But it's still something to take into consideration.

You can find out more about eToro here

Trading on Plus500

Here are some of the pros and cons of using Plus500 as a trading platform:

Disadvantages of Using Plus500

  • 76% of Traders Lose Money on Plus500 – 76% of traders lose money trading CFDs on Plus500. Remember CFD trading is not the same as buying the real stocks on eToro. It's more complicated and most new traders don't understand the risks involved.
  • Contracts Expire – When you open a trade on Plus500 you aren't buying the underlying asset. You are just trading a CFD. The CFD contracts will expire on Plus500. With a stock you can hold it for as long as you want. With Plus500 you'll be charged overnight and weekly fees for keeping trades open.
  • Leverage: On Plus500 you can't change the amount of leverage you're using. The leverage is also not isolated on a trade by trade basis (it is possible to turn on leverage through eToro and the leverage is isolated so you can never lose more than the value of the trade). On Plus500 it is possible to lose more than the amount you've invested. Leverage is a complicated financial tool for advanced traders only. Unfortunately many beginner investors try and trade using leverage. Most of them end up losing money.

Advantages of Using Plus500

  • You can day trade – because Plus500 is a CFD trading platform you can open and close as many trades as you want without hitting limits that are usually imposed by exchanges. However day trading is risky, and is only for advanced investors.
  • Deposit Bonuses – Plus500 does offer a number of bonuses for Australian traders.

If you're an experienced trader then Plus500 might be a good option. But for most casual investors, and those just looking to build a portfolio of stocks, Plus500 is definitely not for you. Before signing up make sure you check out some of the reviews on Reddit from newer traders.

eToro vs Plus500 – let me know your experiences

Have you traded on Plus500 or eToro? Let me know in the comments what your experiences have been. I'm currently using eToro to mostly trade U.S tech stocks as well as some copy trading.

Leave a Comment