In the world of investing, you have banks and brokers through whom you can invest in the stock market. Names like BUX Zero, DEGIRO, Brand New Day, Semmie, Meesman: there are so many. At Elfin, we take a look at what the various parties have to offer and what it means to invest with them. In this article, we discuss DEGIRO. No doubt you’ve seen this name come up before and also want to start investing with DEGIRO. But why invest with the DEGIRO and what’s involved?
Small note in advance: investing is risky darlings. You may lose (part of) your deposit. Invest only with money you can spare and make sure you make informed decisions!
What is DEGIRO
DEGIRO is a so-called broker. A broker is a stockbroker and can refer to either a person or a company. Through a broker, you can buy and sell stocks and bonds on the stock market as an individual. The bank where you manage your pennies can and often does. Nowadays there are more and more companies that are not banks but offer these services. These often operate exclusively online. One example is DEGIRO. But also BUX Zero, Saxo and Easybroker. A broker derives its income from commission on transactions. So DEGIRO is a broker, which has made it easy for private investors to invest themselves, any time of the day, in person, in stocks and exchanges around the world.
| Easy to open account? | Yes, a good Know Your Customer Process requires some attention. |
| Queue to open account? | No, not at this time |
| Focused on short-term or long-term investing? | Both, depending on investment products you choose |
| For investing in individual stocks? | Yes |
| For start-up investors? | For the investor who knows the difference between different products and risks |
| Choose funds yourself? | Yes |
| Dividend products present? | Yes, you can invest in dividend stocks and ETFs. |
| Good online customer service? | Fine, very formal, but they respond quickly |
| Can I withdraw my deposit and return whenever I want? | The account is cancelable daily and you can enter and exit money at any time. |
| Minimum deposit amount for deposits? | N/A. |
| Minimum deposit amount for setting up monthly direct debit? | No |
| One-time deposit possible? | Yes |
| Risk profile? | No, you are responsible for the risk you take. If you want to invest in some products such as REITs, you do have to take a short test beforehand to gain access to these types of products. |
| Cost? | Connection fees for the exchange you trade on ( €2.50 per year) and transaction fees (e.g. €2 + 0.03% per transaction on the Amsterdam Stock Exchange). Check out this article for more info on fees at DEGIRO. |
| Efficiency? | Entirely depends on type of investment products you invest in. |
| Interest on counter/savings account? | N/A. |
Investing at DEGIRO
DEGIRO is a trading platform where you can invest in many stocks and ETFs. Through DEGIRO, you can invest on global stock markets. Through DEGIRO’s core selection, you can trade about 200 ETFs every month for free. In addition, transaction costs for other products are fairly low, depending on which product and on which exchange.
The cost
Costs can seem like mere trifles, but this can really put a huge strain on your returns. Degiro works with different types of fees – also depending on your account and your assets You pay a connection fee for the exchange you trade on ( €2.50 per year) and transaction fees (€2 + 0.03% per transaction) per trade. Currency costs come into play when you invest in dollars and thus the euros must be converted.
However: DEGIRO works with a so-called core selection. This selection includes trackers where you get to make 1 free investment each month where you pay only the handling fee (€1). And by free, we mean: you pay no transaction fees. There are conditions attached to this and you can find them on DEGIRO‘s site.
What are the type costs?
At DEGIRO, you have 2 types of accounts, Basic and Custody. These two types of accounts each have their own fees at DEGIRO. We will come back to these 2 types of accounts later.
- Transaction costs
- Connection fee
- Currency
- Cost of dividend administration
Transaction costs
Almost every country lists a percentage with its transaction fees. That is then a percentage of the price of the stock you pay (or sell) for it. So if you buy €1,000 of a share in the Netherlands you pay €2 + (1,000 x 0.0003 = ) €0.30 = €2.30 in total.
Connection fee
In other words, scholarship costs. DEGIRO charges fees for the fact that you trade on a particular exchange. This is €2.50 per scholarship per year. The exception is the Euronext in Amsterdam and in Brussels. These are free! So if you have shares on the Amsterdam Stock Exchange and the Frankfurt Stock Exchange (Germany) and the New York Stock Exchange (United States), you pay a total of €5 per year. So that’s because you are active on 3 exchanges but trading on the Amsterdam Stock Exchange is free.
Sometimes you have multiple fairs in 1 country. For example, in the United States you have the New York Stock Exchange (NYSE) and the NASDAQ. So if you have shares in both exchanges you pay a total of €5 per year. It’s not much but something to consider.
Currency
At DEGIRO, you trade in euros. But if you buy a stock in, say, the United States, you pay in dollars. Your euros must therefore be exchanged, just before you buy a stock or ETF. By default, this is performed automatically by DEGIRO and the cost is 0.1% of the purchase amount. So for every €100, you pay 10 cents. At DEGIRO, these costs are directly reflected in the exchange rate. These costs are called currency charges.
Dividend Administration
If you have chosen to create a custody account, you will pay an administration fee on your dividends. That is always €1 + 3% of the dividend payment. So if you received €10 dividend (after tax) from, say, ASML stock, then you will pay €1-, and €0.30 to Degiro. This is just an example, what ASML is paying out in dividends at the time of writing is slightly different than that 10 euros.
View DEGIRO’ s current cost sheet here to find out more precisely what investing with DEGIRO would mean for you.
Account type
When you open an account, DEGIRO asks if you want a Basic or a Custody account. A custody account – for which you pay more and where you also pay fees on your dividends to be received – means that DEGIRO is not allowed to lend your securities (= stocks, bonds or other type of investment products). Securities lending happens frequently and is often done by banks, insurers and pension funds to generate short-term cash flow. For this, they then give the securities as collateral. This poses an iniminite risk. Iniminie because = a good broker has a custody company. This ensures that if the broker goes bankrupt, the shares remain the investor’s.
What are the benefits of investing with DEGIRO?
We see the advantages of DEGIRO as follows:
- App: they have a very nice app with various analysis tools.
- Access to many trackers, stocks and bonds. Through DEGIRO, you can invest in almost anything. From Alphabet to gold funds. Access to the whole world!
- Favorites. Through your profile, you can easily mark stocks, trackers or companies as favorites.
- Low cost. Costs depress returns, and at DEGIRO, if you want, you can trade for free every month through core selection. Other costs are also low. In the Beginning to Invest course, we have a cost comparison document.
What are the drawbacks?
- Degiro regularly receives fines from the AFM for exposing their clients to too much risk. Ai, bad business! How big those risks are? Read it here. DEGIRO did win awards for best broker. Plus they have 2.5 million customers. That’s saying something.
- For a novice investor, DEGIRO can be too much in terms of interface: there’s a lot going on, new terms, new screens. That may deter.
- You can do one free transaction each month through the core selection, but this is limited. Want to trade and buy stocks every week, for example? Then you are in a better position with another party such as BUX Zero.
- At DEGIRO, you cannot use the passive investment strategy, so you have to work on your own. That may be fine and depends on the type of investor you are.
Conclusion
Some people swear by DEGIRO and others prefer to choose another party. For yourself, it is important to identify what type of investor you are, how often you want to make trades and what risks you want to expose yourself to. If you are looking for help with this, you can join Elfin’s “Starting to Invest” course, where you will learn the basics of investing and get tools to find an investment party that suits you.
