Here is my Australian guide to investing in eToro for the long term. On eToro you can buy shares and ETFs and hold them for the long term without paying any commissions.
eToro can be used both as a short term trading platform (to profit off the movement of trades over a day) or for long term investing (growing your wealth over time). Day trading is complex and difficult. It’s not for most people. If you’re looking for long term gains on eToro, then here is a potential strategy for inspiration. Remember this isn’t investment advice – always do your own research.
What not to invest in for long term investing
Here is what you should avoid if you’re looking to invest for the long term:
Forex is trading one currency for another. You can trade forex pairs on eToro.
Let’s compare Forex to Stocks. Over a long period of time, the stock market has always gained in a value as an index. So if you’re holding an index ETF (which is made up of stocks) you’ve got a good chance of it gaining value if you hold onto it. With forex this isn’t the case. Take a look at the AUDUSD. At certain points the AUD has been worth close to 1 USD. At other times it has been worth close to half a USD. Forex pairs fluctuate rather than just gain in value.
In order to trade forex successfully you need to be an expert trader. Holding onto a forex trade for a long time usually isn’t a smart move. You’ll be paying daily and weekly fees to keep it open. So let the experts trade forex.
While buying and holding onto a commodity like Gold for the long term might sound like a good idea, it’s not a smart trade on eToro. Commodity trading is very different to buying and holding the actual commodity. Commodities have traditionally had much more volatility than an index ETF of stocks.
If you are looking to invest in Gold on eToro, I would recommend doing so without leverage. You can invest in gold without leverage, however the minimum trade size is $1000. So if you’re looking to build a diversified portfolio, you’ll need a lot of cash. A better option would be to invest in the GOLD ETF on eToro. You can add that to your portfolio with just $50.
Trading commodities is complex and should only be traded by advanced traders.
Even though ASIC recently introduced measures to reduce the risk of leveraged or margin trading, it’s still risky. It is possible to trade with leverage on eToro. An eToro does have isolated margin on each trade. This means you can’t lose more than your original trade size. But leverage should only be used by advanced traders.
I don’t trade with leverage on eToro. Even if I’m opening a CFD trade, I always trade it without leverage.
How to invest in eToro for the Long Term
This is my strategy for longer term investing on eToro. Remember this isn’t investment advice – always do your own research.
My portfolio on eToro is made up of shares, ETFs, a small amount of crypto and some copy trading. Here is how it looks:
Investing in a diversified portfolio of shares
On eToro you can buy real shares (not just CFDs). eToro offers US share trading with zero commissions. This means you can invest in a portfolio of companies like Apple, Tesla, Netflix etc.
eToro supports fractional investing. This means you can buy a fraction of a share. The minimum trade size on eToro for shares is $50.
One strategy for long term investing is to build a portfolio of shares and then just buy and hold. My portfolio on eToro is mainly made up of tech stocks.
Investing in ETFs
ETFs can be a lower risk way of investing in shares. ETFs can be made up of hundreds or even thousands of underlying assets. On eToro you can invest in ETFs with zero commissions. And there are no ongoing fees (if you trade without leverage).
You can invest in thematic ETFs such as ARKK (Ark Innovation) which is made up of future looking companies such as Tesla. Or you can invest in index ETFs like QQQ which tracks the performance of the Nasdaq 100.
You can invest in ETFs with just $50 at a time which is great for dollar cost averaging.
Buying and Holding Crypto
On eToro you can buy and hold crypto and you won’t pay any fees apart from the spread. This is one of the best features of eToro – you can trade newer assets like Bitcoin alongside more traditional assets like stocks. In my portfolio I hold a small amount of bitcoin for long term gains. In 2020, it was my number 1 performer.
Crypto is volatile and I have no idea where it’s going. So I always tell people to never invest more then they can afford to lose.
Adding Copy Trading to Your Portfolio
Copy Trading is a unique feature on eToro. It lets you invest in a trader! When you copy a trader, every trade they make will be replicated in your account. You can browse through the profiles of traders to see how profitable they have been in the past (remember past performance doesn’t guarantee future performance), see what trades they have made and how risky their trading has been. I’ve put together a complete guide on how to find traders to copy on eToro.
I’m looking into adding more copy trading to my portfolio. Personally I feel that copy trading is riskier than just buying and holding a diversified portfolio of stocks and ETFs. Some of the traders on eToro have had fantastic success in the past and are hugely experienced. But you are still investing in an individual. I’m going to add copy trading a small (~20%) part of my overall etoro portfolio.
That’s my long term investing strategy for eToro. How are you using eToro to invest? Let me know in the comments.
Tip – You can build this entire portfolio using a virtual/practice account on eToro. If you want to see how investing on eToro works, but don’t want to risk any money you can sign up for free and trade with virtual funds. Every account on eToro has a virtual account attached to it.