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eToro, recommended online broking platform for those who are in South Africa and want to acquire Ethereum
Why do we recommend it?
- It is really simple and manageable
- It offers strategies from successful investors so you can copy them
- Accepts short-trading
- eToro offers leverage
- There are uncountable investment opportunities
Official main site: www.etoro.com/ethereum
You should definitely consider eToro if you are interested in buying Ethereum from South Africa.
“Social trading”, a relatively new investment method that consists in replicating techniques and strategies from other experienced investors, has become popular because of eToro.
eToro has solutions for you, even if you don't have much experience in trading. You can rest assured that you will be doing a smart investment move when replicating those from subjects with a long profit record. And for those skilled investors willing to share their techniques with others, eToro rewards your knowledge with money.
Another thing to mention is how manageable the interface is, which turns out perfect for new users that are just learning all about the trading world.
About ETFs
ETFs or Exchange-Traded Funds are similar to index funds. They can be described as a combination of stocks and mutual funds, including the best features of both. They can be traded like regular stocks, but include a wide diversity of assets and their fees are much lower than those of an actively managed fund.
Forex trading
Forex or currency trading allows obtaining profits by converting one currency for another.
If you decide to trade the EUR/USD pair, for example, you speculate how many dollars it will take to buy a euro, thinking that after buying the first currency (the euro) it will increase compared to the second (the dollar), to make a profit by selling it. Let's say you entered when the price of one euro is 1.10 USD and you close when it is worth 1.15: that difference is yours once you make the operation.
Perhaps you already inferred this, but this type of trading requires a large capital, because prices rarely increase that much, or using much leverage, which is a bit like skating on thin ice. If you are new to the world of trading, we don't recommend beginning with Forex, because it's not the safest alternative.
Most currencies are available on eToro. Still, take into consideration that this market works with contract for differences, which means the underlying asset won't be yours.
Stocks
The most common financial instruments are stocks: these are portions of publicly traded companies. It is possible to own a proportion of a company and have returns, but first, you should know where to invest your money.
There are, essentially two types of shares: the ones that divide their earnings regularly among the shareholders, and those that don't. The former ones are great, obviously, but investing in the latter can also be a good idea since sometimes you can make even more money by selling the shares later.
If you invest in stocks that payout, you will receive the funds into your eToro account, and you can withdraw them or invest back. Nevertheless, compound interest is magic, so our suggestion is that you reinvest if you don't need the money immediately.
If you invest in stocks on eToro, you can use leverage. However, we don't recommend that, since it would be a CFD and you would not receive dividends. Besides, equities are regularly long-term investments, and you have to pay fees during the time your position is open.
Commodities (raw materials)
The main advantage of investing in commodities is that their price varies less than that of other financial assets. Actually, their security is what makes people often invest in raw materials, to take refuge from market volatility or inflation. However, the prices of commodities are defined by their demand. Therefore, if a generalized fear of inflation causes higher demand, the prices will also be higher.
Note that the only intended income from the investment in raw materials will be the hypothetical capital gain after the sale since, unlike shares, these do not pay dividends.
Commodities can be classified into two main types: hard raw materials and soft raw materials. The former are precious metals (such as gold, silver, copper, and platinum), industrial metals (like aluminum, iron, or zinc), and oil; while the latter are agricultural products, such as cocoa, soybeans, rice, or sugar.
Exchange-Traded Funds
Have you heard about Exchange-traded funds or ETFs? They are similar to index funds and are known for merging the advantages of stocks and mutual funds, because they can be traded regularly at market price, but have much more investment possibilities and considerably lower fees.
About Index Funds
If a long-term investment sounds like something you would do, and you won't need to withdraw your money in at least five years, index funds can be the best choice. This kind of investment is also suitable for beginners since the risks are lower. Besides, the variety is wider.
Contrary to what it may seem, very few investors can beat the benchmark (yes, you have surely heard of managers who obtain huge profits).
But putting aside some exceptional cases, not everything is as good as it sounds: if you hear of someone who has beaten the market, they have probably done so for a short time, or charges so many commissions that it ends up being better for you to index (whit minimal commissions). Besides, if something happened once, it doesn't necessarily represent a regular behavior.
Index funds provide solutions to both concerns: their rates are insignificant and they beat active managers almost all the time, although in the long term.
Is eToro reliable for purchasing Ethereum?
eToro is very meticulous with the data about past performances from users, and its integrity has been tested once and again by independent organizations.
The main office of eToro is located in Cyprus, and therefore the broker is certified by the Cyprus Securities Market Commission (or CySEC), which can cover up to € 20,000 from its client's debts, including those from South Africa. On the other hand, eToro meets all the strict requirements of the European Union.
eToro responds to the European Financial Instruments Market (MiFID), and to the Financial Conduct Authority or FCA in the U.S. You should also know that it has a trajectory of fifteen years, with more than 20 million users around the globe. So, you can be sure that your money is safe.
Finally, their excellent customer service is also worth mentioning. They have a phone number for assistance, a ticketing system to track any claim, and a live chat.
How to deposit funds on eToro
When it comes to depositing money on eToro, there is not much to say, since it is really straightforward. You only need to select “Deposit funds”, set an amount, and choose your payment method. You can pay with PayPal (available for some countries), bank transfer, credit card (Visa, MasterCard, Diners, Visa Electron and Maestro), Skrill, or Neteller.
Of course, keep in mind that for security reasons, you need to be the owner of the account or the credit card.
The lowest amount you can deposit is $ 200, and there is a maximum authorized for unverified accounts. Therefore, in case you plan to operate with higher amounts, you should verify your account previously.
Finally, know that you can make the transfer in any currency because eToro defaults all deposits to USD, but charges a commission for it, so it is preferable to make the transfer directly in USD.
Futures Vs CFD
How are Futures and CFDs different?
- Who is the counterparty? In the case of Futures, the counterparty is another trader. In CDFs, it’s the brokerage, in this case eToro
- Date of expiration Futures have a determined expirationdate. CFDs don’t expire
- Variety of options for trading The market for Futures is narrower. CFDs include a wide range of possibilities.
- Minimum deposit amount or “trade size” Costs for Futures are higher than costs for CFDs.
- Leverage With Futures, it isn’t possible; while with CFDs it is.
About Contracts for Difference
It is possible that you have found the initials CFD all the time if you already accessed eToro. Before we explain what this is, we must say that CFDs on eToro are only possible when you are short-selling or select leverage over x2 (and this is not even available on the platform).
For the record, and if you are thinking about day trading cryptocurrency and other advanced practices, below you will also meet concepts such as leverage and “going short”.
With CFDs you can bet on eToro even if you are “in red” or don't have a positive balance. In a hypothetical case: you believe that the Ethereum will go down, so perhaps it is obvious to think “if it is going to depreciate or go down in price, I'll simply wait until it does and then I'll go in”. But if it really falls, it might mean extra money for you.
You can accomplish that by “going short”. More or less, it works like this:
- You ask for a loan of, let's say, 100 units of Ethereum, which total value at that moment is $ 5,000 (these numbers are made up)
- Next, you sell them at their price on the market, $ 5,000
- The Ethereum devaluates from $ 50 to $ 30
- You buy all 100 units again, but now their price is $ 3,000
- You return the 100 units to the loaner
- The $ 2000 difference is yours
Keep in mind that it seems much more complicated than it really is: we can just say that by trading in Ethereum you can also make money if you foretell the downs.
How to use eToro
We mentioned before that one of the best things about eToro is how simple it is to use the platform. You don't need to read a lot or have previous knowledge to start trading.
You won't have any issues with the interface if you have used any other social network, like Twitter or Pinterest.
We will explain the registration steps and the different tabs that you will find.
You will have to fill in some information requested when registering.
During the sign-up process, you will also have to answer some questions about your previous investment activities.
However, it is not like you are answering a test. They are only measures to know how much knowledge you have and what type of financial instruments they can recommend. For example, if it is your first experience in the investment world, they will not suggest that you invest in futures.
Next, we will explain the fundamental sections of the site.
“Set Price Alerts” allows you to put alarms on the price of certain securities. It is a very useful tool for when you are after an asset which price is decreasing, but perhaps you think that it will decrease even more.
“News Feed” is the more “social” section. There, users can interact and share experiences.
“Discover” includes the tabs “Instruments”, “People” and “CopyPortfolios”. As we mentioned in this guide, the six types of instruments on eToro are:
- Cryptocurrencies
- ETFs
- Shares
- Raw materials
- Forex
- Index funds
In “People”, you will find eToro users and their performances. This is where you can copy the movements of your preferred traders.
In this section, you can find those traders that you find more interesting. When you choose an investor and indicate how much money you want to invest, eToro will automatically replicate their movements, proportionally. If you have $ 1000 and the trader puts 20% of their funds in an asset, eToro will invest $ 200 of your funds in the same asset as well.
You will also see the three main types of CopyPortfolios, which are classified into “Top Trader”, “Market” and “Partner”.
Sometimes you might prefer copying to CopyPortfolios than to individuals, since the former offer more diversity. There are all kinds of portfolios that you can identify easily and are divided by sectors. Therefore, in case you think a specific sector, like biotechnology or healthcare, has a good chance of prospering, you should probably look for that specific portfolio.
How does a virtual portfolio work?
Are you beginning in trading? Using a demo account can be useful. You just need to set the virtual mode and you can start trading with fictional funds.
A virtual account can help you to practice and gain experience before starting to trade with real money. When you create your demo account, you will begin with a virtual balance of $ 100.000, to trade with a variety of financial instruments available on eToro (not only with Ethereum).
The first attempt is not usually that good. But don't worry, since you can ask support to replenish the virtual $ 100k to your portfolio, and the second try you should do better.
Keep in mind that you should always be prudent when investing, however, using a virtual portfolio might have the opposite effect. It will never be the same as risking your own money.
As you may suppose, the virtual mode is kind of absurd if you intend to trade in the medium or long-term (which almost assures you a profit only by replicating an index), since you would be wasting years to see the outcome. Virtual accounts may be ideal for trying out short or medium-term investments.