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DEGIRO Review 2022 – Discount Broker for EU residents

Franklin Carneiro da Silva| Updated August 31st, 2022
DEGIRO Review 2022 - Discount Broker for EU residents 1
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Hi! We are going to review DEGIRO to help you find out whether DEGIRO is the right investment platform for you.

We recommend DEGIRO if you are an investor looking for a low-cost brokerage in Europe. It offers free commission trading for stocks and ETFs, and it is a good choice for creating a long-term portfolio of securities.

The platform was named “Top Rated Overall Investment Platform & Investment App 2020” by the Financial Times and Investors Chronicle (UK), “Best Discount Broker 2021” by Brokerchooser, among 80 other international awards that name DEGIRO as the best and cheapest way to invest online in Europe.

DEGIRO is a good fit for most investor types, including traders. Their competitive commission structure and a broad portfolio of investment options make it a great choice for beginners, as well as for more experienced investors. This helped them become one of the largest brokers in Europe, reaching more than two million clients.

On the downside, it charges a €0.50 fixed fee in most transactions, offers little research, no demo account, and you won’t find Forex, CFDs and direct investment in cryptocurrencies.

That’s DEGIRO’s review in a nutshell. If you want a more detailed DEGIRO review, keep on reading. Here’s what we’ll cover:

1. DEGIRO Overview

Launched in 2013, DEGIRO is a discount broker based in the Netherlands and available in 18 European Countries, allowing retail clients to benefit from the same low rates and opportunities that were only available to professional investors. The company offers a vast range of investment options: shares, investment funds, ETFs, futures, leveraged products (not exactly the same as CDFs. More info here), bonds, options and warrants.

The company defines its brand in 5 keywords: low-cost, empowering, simple, trustworthy, and comprehensive. Its main competitive advantage explaining its tremendous growth is its low commission structure. However, many people are afraid that this might be too good to be true and, as a result, show signs of insecurity about the safety of the platform.

So, how can DEGIRO offer such a low-cost service?

Apart from the commissions charged in some products, DEGIRO generates additional revenue within the currency conversion fee, by allowing you to leverage your portfolio, by charging you an interest rate on the loan amount, and lending your shares to other investors for short-selling activities, for instance, but with rigorous risk management procedures. Lending shares allows DEGIRO to significantly reduce costs but also implies an additional small (yet existent) risk for investors. Plus, other services include placing orders through phone or email and registration for shareholders’ meetings.

DEGIRO Highlights

🗺️ Supported Countries 18 European Countries
💰 US Stocks and ETFs Free – not all ETFs are free – (+€/£1 external fee)
💰 European Stocks €/£3.90
💰 Currency Conversion fee 0.25%
💰 Connectivity fee €/£2.50 annually, per exchange
💰 Inactivity fee €/£0
💰 Withdrawal fee €/£0
💵 Minimum Deposit €/£1
📍 Products offered Stocks, Funds, ETFs, Futures, Leveraged Products, Bonds, and Warrants
🎮 Demo Account No
📜 Regulated by BaFin

3. DEGIRO Pros and Cons

Pros

  • List of commission-free ETFs available (one free transaction per month – check DEGIRO’s official website in your country)
  • Commission-free stock (US, CA and home market) and ETF trading (ETFs inside the core list) – €/£1 flat handling fee still applies
  • User-friendly web and mobile app
  • Wide range of investment options
  • Education material: Investor’s Academy and Investing with DEGIRO
  • Low commission structure
  • No account opening, inactivity, or withdrawal fee

Cons

  • 0.25% currency conversion fee
  • €/£2.50 of connectivity fee (paid annually)
  • Does not offer Forex, CFDs, and Cryptos
  • No demo account
  • Little research
  • Low-quality customer support
  • Only available in 18 European countries

4. Fees snapshot

DEGIRO offers commission-free trading on US, CA and in your home market stocks, and ETFs. Still, there is a “catch”. When placing an order, you will notice a €0.50 fee, a cost that does not go to DEGIRO’s pockets. In other words, DEGIRO charges you nothing, but it passes you external costs related to clearing and settlement expenses, brokerage fees, regulatory fees, and execution fees. That’s why you see the €/£1.

Additional fees you may pay will depend on the type of asset class (stocks, ETFs,…) and the securities exchange (NYSE, NASDAQ, LSE,…). In general, their trading fees are low, and they even offer one free trade per month for one of their commission-free ETFs available (check DEGIRO’s official website in your country for the conditions applicable). Besides, there are no account opening, inactivity, or withdrawal fees.

You will have to pay an annual exchange connectivity fee of €2.50 (capped at 0.25% of your portfolio is less than €400) per year per foreign exchange (the exchange connectivity fee is charged when you buy an asset that isn’t listed in your home country) and a 0.25% fee on currency conversion (Example: You have EUR and you want to buy/sell an asset in USD, you will pay this fee). However, since you have the option to hold a US dollar account, you may only incur currency costs (e.g. 0.25%) when buying an asset for the first time in a currency other than the EUR and when transferring money outside your account, which forces you to convert again to EUR because you can only deposit/withdrawal in EUR.

In other words, you deposit in EUR, buy an asset in USD (pay the 0.25% fee), then sell the asset and keep the USD amount for as long as you wish. If you want to buy another asset in USD, no currency fee applies since you are using USD. But If you want to withdraw money from your account (or just get some EUR), you will need to convert the USD back to EUR (pay the 0.25% fee again).

Free trading is part of the recently introduced “DEGIRO goes ZERO” campaign which states that trading stocks and ETFs have a 0% commission. However, users tend to trade more often US-denominated stocks, which is subject, as mentioned in the previous paragraph, to the new FX fee of 0.25% (Included in every transaction in a foreign currency), which makes it not so “cheap” to buy assets dominated in USD, for instance.

Let’s dive into a few examples:

Costs per trade (buy OR sell)

Home market stocks*

EU Stocks

US and CA stocks

ETFs from the core selection list

Other ETFs

Commissions

€/£0.00

€/£3.90

€/£0.00

€/£0.00**

€/£0.00

Flat Handling fee (External cost)

€/£1.00

€/£1.00

€/£1.00

€/£0.00

€/£1.00

FX fee (0.25%) - €1000 trade

-

-

€/£2.50

EUR: €0.00
Other currencies: €2.50

EUR: €0.00
Other currencies: €2.50

TOTAL costs

€/£1.00

€/£4.90

€/£3.50

€/£0.00, €/£2.50 or €/£3.00

€/£0.50 or €/£3.00

*This varies between countries. For example, if you are a UK or a Portuguese resident, it will refer to LSE and Euronext Lisbon stocks, respectively.
**Every month, the first transaction made on an ETF listed, it’s free regardless of amount or direction. If you want to buy again in the same month, you will be charged the €/£1 flat fee unless the order is above 1000 EUR/USD. If you want to sell during the same month, a fee will apply independently of the amount.

Every time you place a trade, a confirmation window will appear, where you will see the total estimated costs (95% of the time, that is what you will be charged) before placing an order, so don´t worry about buying something without knowing beforehand the costs associated. However, fees vary from country to country, so please make sure to check your country’s fees here.

As you just witnessed, despite being competitive, you still pay commissions and fees. If you are an active trader, please take a look at our Reviews of eToro, Trading 212 and Interactive Brokers.

5. Safety and Regulation

 

FlatexDEGIRO Bank Dutch Branch, trading under the name DEGIRO, is the Dutch branch of flatexDEGIRO Bank AG. As a German regulated bank, flatexDEGIRO Bank AG is regulated by the German financial regulator, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). The Bafin is the German equivalent of the Dutch Authority for the Financial Markets (AFM).

DEGIRO clients’ assets are segregated in separate entities and thus protected against the insolvency of DEGIRO. In the unlikely event that the segregated assets cannot be returned to clients, DEGIRO falls under the German Investor Compensation Scheme, which compensates any losses from non-returned assets up to 90% (with a maximum of EUR 20,000). Furthermore, any money deposited on a DEGIRO Cash Account with flatexDEGIRO Bank AG will be guaranteed up to an amount of EUR 100,000 under the German Deposit Guarantee Scheme. Information about the German Investor Protection Scheme and the German Deposit Guarantee Scheme can be found in English on the BaFin website here.

It’s also registered with the financial authorities in the countries in which it operates, such as the Financial Conduct Authority (FCA) in the UK, and the Portuguese Securities Market Commission (CMVM) in Portugal.

To better understand the German Investor Compensation Scheme, let’s give you an example: Imagine you have €30.000 invested. If DEGIRO goes bankrupt and only has €10.000 of your €30.000 safeguarded assets (very unlikely but good for the illustration purpose), you would receive €18.000 as compensation (90% of €20,000 – “non-returned assets”). Yeah, you would lose €2,000.

Why do we say that it is “very unlikely” to occur to your assets? First of all, DEGIRO doesn’t hold your assets: they are located in a Special Purpose Vehicle (SPV), also called a Special Purpose Entity (SPE), which is a custodian entity holding them separately from DEGIRO’s balance sheet, so that, in case the company doesn’t perform well, your assets won’t be affected.

Secondly, if DEGIRO did not have your assets safeguarded, that would be probably classified as fraud, and that is something that can occur in any Broker, so that’s a risk you will always have. Your assets are your assets. Period. The only issue you would face could be to transfer your securities to another broker who can take weeks, months, or even years.

Besides, if DEGIRO decides to get loans for its business activities and cannot repay them, your assets will not be claimed by its creditors.

Do you want to read a deeper analysis? Check out our dedicated article on investment protection (for EU investors)! If it is not clear, please let us know in the comments below!

Franklin Carneiro da Silva
Co-Founder & Fintech Analyst

Franklin is a CFA Level III Candidate with 3 years of experience in Wealth Management as a Fund Research Analyst and the Host of the "Edge Over Hedge" YouTube Channel.

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