DEGIRO online broker review and experiences

DEGIRO online broker review and experiences

Author: Jelle Huisman

The number of people who start investing online is still rising sharply. More and more people are realizing that they have to take care of building up their own capital. You can no longer assume that the pension that you might build up through an employer will be sufficient for a financially secure old age.

Investing does not have to be difficult and is especially fun. I believe that anyone who is interested in what is happening in the world can benefit from the good returns that investing can bring over a longer period of time. Just think, for example, of the rise of technology companies such as Amazon, Microsoft, Google and Facebook. If you had invested $1,000 in Amazon shares in 2009, they would have been worth $13,300 by the end of 2019. This represents a return of 1232 percent (Source: CNBC).

The best time to start investing was yesterday. The second best time to start investing is now. To be able to buy and sell shares and other financial products you only need an investment account. It is important that you open such an account with a reliable online broker who is well known. For the rest, it is up to you and the possibilities are endless.

Why DEGIRO?

Since my first work experience at a financial institution in 2001, I have been investing in shares myself. I first did this at a traditional bank. Nowadays, most investors have an account with an online broker. I opened my own online investment account with DEGIRO about 5 years ago. At DEGIRO I invest in shares and ETFs (Exchange Traded Funds). I use a different broker for day trading and the occasional trading of leveraged products.

DEGIRO positions itself in the market as a reliable “low cost” online broker. I will come back to this later. This review is based on my own user experience. Of course there are many more good brokers on the market and I see this review as a great opportunity to test my experiences with DEGIRO.

In this review we look at:

  • What exactly is DEGIRO?
  • Which licences does DEGIRO have?
  • Product range
  • Costs
  • Trading platform and user-friendliness
  • Conclusion on DEGIRO

What is DEGIRO?

DEGIRO is a European online broker headquartered in Amsterdam. Since 2013, DEGIRO offers private investors the opportunity to invest in shares at wholesale prices. Meanwhile, DEGIRO is known as an innovative reputable online broker with more than 600,000 clients spread across 19 countries. According to its own statements, DEGIRO is mentioned in 65 international surveys as the best and cheapest broker to invest online.

Which licences does DEGIRO have?

Reliability is essential when choosing a good broker. DEGIRO is supervised by the Netherlands Authority for the Financial Markets (AFM) and under the prudential supervision of the Dutch Central Bank (DNB). DEGIRO is also registered with the British Financial Conduct Authority (FCA).

All investments made through DEGIRO are held in a separate custody company. The custody company administers and holds all investments and is completely separate from DEGIRO. Should anything happen to DEGIRO, investors do not run any risk of losing their investments. DEGIRO therefore makes use of the legally required segregation of assets.

Money Market Fund

DEGIRO is not a bank. As an investment company, DEGIRO does not hold client money. DEGIRO can therefore never have access to your money. Funds that you book to DEGIRO are directly used to purchase shares, for example, and further placed in a so-called Money Market Fund. A Money Market Fund is an investment fund whose objective is to achieve a return that is at least as high as the market interest rate in the relevant currency, with as little risk as possible. However, you can also choose to invest the value of the Money Market Fund in other financial products. Of course, you can also have the value booked into a contra account at any time.

Investor compensation scheme

Since DEGIRO is an authorised investment firm, it is covered by the so-called guarantee scheme for investment firms.

DEGIRO has all the necessary licences and arrangements. On the website of DEGIRO a transparent and extensive explanation is offered about the licenses and arrangements.

Product range

DEGIRO offers access to more than 50 exchanges, spread over 30 countries. These include, of course, the most common exchanges such as: Euronext (Amsterdam, Brussels, Paris), Xetra, Börse Frankfurt, NASDAQ, New York Stock Exchange (NYSE) and the London Stock Exchange (LSE). Especially in the field of shares, DEGIRO offers extensive possibilities. If you want to trade other products, such as options or bonds, you will need to take a look at DEGIRO’s website to see which stock exchanges are offered for this purpose.

DEGIRO offers the following products:

  • Shares
  • Investment funds (unlisted)
  • ETFs (Exchange Traded Funds)
  • Futures
  • Leverage products (offer through external banks)
  • Bonds
  • Options
  • Warrants

I myself am a fan of shares and ETFs. An ETF (Exchange Traded Fund) is a passively managed investment fund (also known as a tracker or index tracker) that is traded on an exchange. DEGIRO charges low transaction fees for the purchase of shares and ETFs. DEGIRO even offers the possibility to buy ETFs without transaction costs (General Terms and Conditions apply).

By far the majority of people will limit themselves to trading in shares or investment funds. Please note that traditional (unlisted) investment funds are often much more expensive than passively managed ETFs. DEGIRO also offers a number of products suitable for day trading, such as options, futures and a number of other leveraged products. These products are generally risky and require the necessary knowledge and experience. If you are thinking about trading leveraged products, for example, I would look for a specialist broker. There are many good Forex and CFD brokers on the market that offer not only a good platform, but also the necessary support and analysis tools.

Costs

For an investor, it is important to look at the costs that an online broker charges for offering its services, as these have an impact on your return. The costs charged by DEGIRO depend on the stock exchange on which you trade and the products in which you trade.

DEGIRO charges the following costs:

  • Transaction costs: fixed amount plus percentage trading size
  • Connectivity costs stock exchange (AEX is free of charge)
  • Currency costs (if not in Euro)

DEGIRO offers its services in 18 different European countries. In each of these countries, the web trader and the mobile application are offered in the local language. Please note that costs may vary from country to country. At the bottom left of the DEGIRO website you can select the country you require.

DEGIRO is known as a broker that charges very low costs. There are, however, a number of points to consider:

Standard Profile or Custody Profile?

When opening a DEGIRO investment account you can choose between a so-called Standard Profile and a Custody Profile.

With a Standard Profile, DEGIRO can lend your investments to other parties, for which it will be paid. Lending is not permitted with a Custody Profile. Lending out investments is a normal activity at banks and brokers and normally involves little risk, as these are subject to strict regulations.

When you opt for a Custody Profile, you have slightly fewer possibilities with your investment account. For example, you cannot go short and you cannot trade in leveraged products such as sprinters, speeders and turbos. You also pay a fee to DEGIRO for dividend payments.

DEGIRO fee overview

DEGIRO’s tariff overview for clients with a Basic, Active or Trader account (Standard Profile) can be found here.

DEGIRO’s tariff overview for clients with a Custody Profile can be found here.

With both profiles you will benefit from the low costs charged by DEGIRO.

Buy and sell costs

For many products, such as shares, DEGIRO charges a fixed amount per transaction, plus a percentage of the trade size. Always make sure you are aware of the cost per transaction before completing a transaction. If you make a purchase for a relatively low amount, the cost of the transaction may be a bit higher compared to the size of the trade. Fortunately, you can see the estimated cost of the transaction on every online order ticket (see image).

DEGIRO Dutch order ticket

No service fee

For both Standard and Custody accounts, DEGIRO does not charge you a service fee or management fee.

DEGIRO connectivity costs

As an investor, you naturally want to see as many up-to-date prices as possible of the stock exchanges on which you trade. Brokers often offer quotes with a 15-minute delay. If you want to receive real-time quotes, you will have to pay a small amount per month. This amount depends on which stock exchange you are trading on. At DEGIRO you will receive free real-time quotes for Euronext (Amsterdam, Brussels, Paris and Lisbon) and the Frankfurt Stock Exchange, among others. All rates charged by DEGIRO for real time quotes are neatly listed in the rate overviews.

DEGIRO currency costs

Imagine that you want to buy a number of shares in Microsoft Corporation (MSFT). This share is listed in American Dollars. In order to be able to make the purchase, you need Dollars. At DEGIRO there are two ways to do this.

By default, you use the so-called Auto FX Trader from DEGIRO, which automatically converts your purchase or sale into the base currency of your account. For this you pay a surcharge of 0.1 percent. This is already included in your buy and sell costs.

There is also the possibility to buy or sell currency yourself. For this you pay € 10.00 plus 0.02 percent of the transaction size. For amounts from € 12,500 it is therefore cheaper to buy or sell currency manually. Since most transactions are likely to fall below €12,500, I prefer the Auto FX Trader functionality of DEGIRO.

Trading platform and user friendliness

DEGIRO’s investment platform is web-based. This means that you can log in to your investment account all over the world, at least when you have access to the internet. So you never have to download anything.

DEGIRO calls its own platform “a user-friendly investment platform with which you can monitor your portfolio, orders and prices”.

The above description gives the impression of a platform that, although good, has some limitations in terms of functionality. In practice, however, this does not appear to be a problem.

DEGIRO’s investment platform is very user-friendly. All markets and products offered can be found quickly. The portfolio overview and the buy and sell buttons are immediately visible. The order ticket needed to make a purchase or sale is also clear and works very intuitively. A strong point of DEGIRO is the availability of good overviews. For example, you can quickly and easily download annual summaries, which of course are important for your tax return.

Research tools and charts

The research tools and charts present in the investment platform are very basic. People who like to work with technical analysis will have to divert to another source for this. A basic analysis of the price development of a share, for example, is perfectly possible. In general, DEGIRO’s platform meets expectations very well. DEGIRO is, of course, a discount broker.

I would advise people who want to trade in leveraged products, options, or other products that are suitable for day trading, to look for a broker that is more specialised in these markets.

DEGIRO mobile app

I have had good experiences with the DEGIRO investment app. The app is very clear and contains almost the same functionality as the web-based investment platform. Executing orders is very easy via the app. At the moment, however, I execute my orders within the web-based trading platform. Nowadays I only use the app to view and assess my portfolio on a daily basis.

ETF savings plan vs self-purchase

The majority of my investments at DEGIRO are ETFs (Exchange Trades Funds). An ETF is a passively managed investment fund that is traded on the stock exchange. ETFs are also called trackers or index trackers, as many ETFs follow an underlying index.

One of my favourite ETFs is the iShares Core MSCI World UCITS ETF (ISIN: IE00B4L5Y983). This ETF follows a diversified portfolio of companies in developed countries. I currently invest a fixed amount in this ETF every month. The iShares Core MSCI World UCITS ETF is part of the DEGIRO core selection. ETFs that are part of DEGIRO’s core selection do not incur any buying and selling fees (General Terms and Conditions apply). In addition, the management fee is only 0.20 percent on an annual basis. This is therefore much cheaper than many other ETFs and actively managed investment funds.

More and more providers are entering the market for so-called ETF savings plans. With an ETF savings plan, you can automatically invest in ETFs every month or period. I can see the advantages of automatic buying, but you should bear in mind that you have to pay for this at the provider in question. DEGIRO currently does not offer ETF savings plans. I buy my desired number of ETFs at the beginning of each month.

Conclusion

DEGIRO more than lives up to its good reputation. DEGIRO’s number of clients has grown strongly in the past few years to more than 600,000. DEGIRO offers a wide range at low cost and has become one of the most renowned online brokers in Europe.

An important positive point is the transparency of the company. DEGIRO is well regulated, offers support in many languages and the investment platform is very easy to use.

For people who want to actively trade in shares or other products such as leveraged products, DEGIRO’s investment platform is less suitable. For example, DEGIRO does not offer comprehensive charting packages that are necessary for good technical analysis. Fortunately, there are many reliable brokers that focus on traders and day traders who want to trade forex, CFDs or indices.

For me, DEGIRO is the most suitable broker for long-term wealth accumulation, while at the same time keeping costs low.

My tips for using DEGIRO

Forget traditional banks

Online brokers offer more functionality and ease of use at a lower cost, compared to trading platforms of traditional banks. In addition, online brokers are visibly much more innovative and thus lead the way in offering new products.

My favourite investment strategy at DEGIRO

I have had particularly good experiences with investing in ETFs and shares at DEGIRO. DEGIRO has many ETFs available from many renowned providers such as iShares (Blackrock) and VanEck. The ETFs I invest in myself are part of DEGIRO’s core selection. I do not pay any buying or selling costs for these (General Terms and Conditions apply).

In addition to ETFs, I mainly focus on the purchase of dividend shares and growth shares. I keep these shares in my portfolio for a longer period of time. For the selection of dividend shares and growth shares I make use of information available on the internet. There are a huge number of good websites on the internet that offer free information, company information and price information. So fundamental and technical analysis is possible without having to pay for it. This applies to shares and ETFs, as well as other financial markets. A good website for carrying out technical analysis and sharing trading ideas is Tradingview.

This is why you need an investment account with DEGIRO

As we have seen recently, an awful lot is happening in the world. These events affect supply and demand, which in turn affects global financial markets. Anyone interested in what is happening in the world needs an investment account. With an investment account you can respond to the changing demand for, for example, oil or a strong decrease or increase in demand for streaming media (Netflix).

A good example is also the enormous rise of the NASDAQ listed share Zoom Video Communications Inc. during this year. As you may know, Zoom offers software that allows you to chat, meet and collaborate with each other online.

Zoom chart

When investing in a share or other financial assets that are rising or falling sharply, it is always difficult to take advantage of the entire value development. In the case of Zoom, even if you had bought the share on 15 June, you could still have benefited from a doubling of its price value. One of the conditions is, of course, that you have an investment account with which you can actually buy the share.

Opening an investment account with DEGIRO

Opening an investment account with DEGIRO is easy and free of charge. Of course, DEGIRO will ask you for some additional information, such as proof of identity and verification of your address. The registration procedure takes little time and after that you can get started right away.

Investing does not have to be difficult at all. Just start by buying a few shares of, for example, the company that produces your favourite food or other products you use regularly (Starbucks, Unilever, Coca Cola Company, Gillette).

On the Major Markets Trading website you’ll find many more articles about trading, investing and personal finance. Most of these you can read on the blog section of the site.

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