An honest and critical review

The exchange rate fees are not great. But where else am I going to go? Iā€™ll use T212 for as long as it remains the cheapest option while having the best features. Until that changes, I donā€™t really want to go anywhere else.

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Feeling the same, I have switched (or partially switched) broker every year so far to get the lowest fees but it seems that thereā€™s nowhere to flee to this time. Should probably start my own broker at this point. I donā€™t have any special feelings for any broker, for me itā€™s all about the fees/taxes as those add up over a 50+ year period.

eToro charges a 0.5% deposit entry fx fee which canā€™t be avoided since they donā€™t accept USD Revolut (they only accept ones who do charge FX themselves) for deposits/withdrawals (eToro does pay your french transaction tax of stamp duty but those two were easily avoidable already). And donā€™t forget the $5 withdrawal fee and atrocious customer support (at least according to Reddit).

Revolut themselves only allow 3 free trades a month and DeGiro has fx fees and transaction fees. Bux charges 0.25% FX fee, Flatex charges transaction fees and Lynx/IB and the banks just are too expensive.

Charles Schwab seems to be a reasonable option as they donā€™t charge commissions (for US stocks) and the deposit FX fee also is avoidable using Revolut, but they have a minimum deposit of $25k so for a student like me thatā€™s not an option for now.

(from a Dutch perspective, in the UK u still have alternatives like Stake, FreeTrade which both also charge fees)

So Iā€™ll probably just switch out some ETFs for EUR denominated ones and reduce/sell my USD/GBP individual stocks. T212 still is the cheapest for me (unless I find some way to deposit and withdraw USD to eToro without FX fee)

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You can go for Charles Schwab, Firstrade. As for Charles Schwab, you donā€™t really have to have 25K. You can start with much much less. They do not enforce it.

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Good alternatives, although the other requirement for me would be an ISA account, which I know doesnā€™t matter to you.

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thank you for clearing that up that takes away a load of problems! :grin:

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One thing to be aware of with Charles Schwab is that they set you up with their US office, rather than one located in Europe. This means that if you were to die it is somewhat more complex for your executor to extract the assets and gain permission from the IRS for exemption from US estate tax. There is a treaty that protects you, but hoops to jump through nonetheless.

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UK customers are handled by Charles Schwab UK as far as Iā€™m aware. CH customers are also handled differently.

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Their UK website states

ā€œYour account will be domiciled in the U.S. and your account agreement will be with our affiliate, the U.S. based broker dealer Charles Schwab & Co, Inc. (CS&Co). Charles Schwab, U.K., Limited informs and helps clients access the services provided by CS&Co.ā€

Also, they explain this

ā€œForeign investors are generally subject to a low estate tax threshold of US$60,000 before being subject to U.S. estate tax at a rate up to maximum of 40% above this threshold on U.S. situated assets, such as securities of U.S. companies. Executors for non-residents must file an estate tax return or Form 706-NA. Please note that the U.S. estate tax rules for foreign investors may be modified by applicable estate and gift tax treaties.ā€

This would be very concerning, except that the tax treaty with the UK does offer a remedy from the default of taxes on assets above $60k. Just extra work for your executor.

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Thanks Richard for the clarification! This will help others :pray:

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As I read, if you do have shares of value exceeding $60,000 then they will be released to your executor without any tax being due (under the UK US estate tax convention) but

ā€œthere is an obligation to apply for a clearance certificate by lodging the US estate tax return (Form 706-NA and supporting forms and documents). Form 706-NA has to be filed to obtain the Federal Transfer Certificate (Form 5173), and only after that Certificate has been obtained (it will take about a year from the time that the Form 706-NA and all its supporting documents are filed with the US IRS until we receive the Federal Transfer Certificate), will you then be able to transfer the shares into the names of the Executors.ā€

It would be interesting to know if anything like this has to happen with shareholding held on Trading 212 (as the custodian is Interactive Brokers) or with Interactive Brokers itself.

If you find a cheaper alternative, let us know.

If the 1% commission (0.5% in and 0.5% out) is the only commission or fee they charge then it depends on how many transactions you makeā€¦ it could be more worthwhile long-term, compared to the 0.15% FX fee on every transaction.

I think even the T212 Team would be interested in knowingā€¦ I think and hope that they still want to remain ahead of the game/competitors, as they have been until now.

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Am I the only one who feels uncomfortable every time I see people use addition for simplicity in place of showing the actual impact?

in this case the effect of an instant withdrawal after deposit at 0.5% fee both ways being 0.9975% of the initial balance.

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The idea I had with eToro was to deposit USD directly if they accepted Revolut as then the FX fee would be zero (only $5 withdrawal fee). But they explicitly donā€™t accept Revolut (just a thought but most likely to not have everyone avoid their 0.5% fee). There are others ofc but none of them have 0 fx fees afaik (even transferwise has fees now).

With most brokers, it just seems that youā€™re rearranging the fee from deposit to trade to both. And for my ā‚¬ portfolio T212 is still the cheapest with lovely features like pies and fractionals so as long as no additional fees are introduced that money will stay here.

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It indeed is less as the fee is only charged again on the indital minus the fee but growth would also have to be taken into account.

I calculated the money I missed out on by paying the FX fee in different scenarios and most of the time it converges to 0.30% :man_shrugging:

8% growth no divis plus monthly deposit end up at 0.29% less money than in fee-free investment
3% growth + 5% divis plus monthly deposit ends up at 0.30% less money than in fee-free investment

So the actual fee paid is less than 0.30% but you also missed out on growth on that fee so the above takes that into account.

I just modelled what I expect my investment journey to be and those are the results for me personally.

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yeah, thats one problem of working with the numbers irrespective to actual values in a portfolio, Iā€™m sure there is a proper way to model for long term growth impact that stays true to the correct %, Itā€™s just that so far we have seen a lot of simple addition used to represent impact that if people were to deposit and withdraw enough times they would think they would lose all of the initial deposit :man_facepalming:

itā€™s not so bad when its just the 1 in&out thatā€™s roughly 0.3% (adjusted for growthĀ±) but what about after 12 times, 24x, 36x et cetera. :sweat_smile: the further we try to forecast the less accurate the simple addition becomes and our model ends up useless.

someone please just spare me from seeing (0.15%+0.15%+0.15%)=0.45% examples crop up again :zipper_mouth_face:

Iā€™m in the process of covering A LOT of accounting and financing material, that should see me able to generate all these cost and growth forecast models that I will need to assess my future plans in regards to deposit, withdrawal and transaction conversions. I wouldnā€™t need to if simple addition could get my the accurate answers to base decisions on :frowning:

It might be worth explaining the 0.45% is taken from dividend reinvestments, but should be looked at as an extra 0.3% to reinvest ignoring roundings.

In the grand scheme it should be immaterial for most bar day traders in non base currencies.

thereā€™s also the weighted impact to consider with frequent deposits. but the 0.45% still seems misleading to me because the original purchase of the share is irrelevant to the dividend.

to the extent that if you are already calculating the number of transaction conversions, you account for dividends reinvestment with 0.3%* rather than 0.45%* as you would have ghost conversions start to creep in to your records accounting for a currency conversion that never happened.

simplified*

Donā€™t scare me please I still need sleep sometimes

Fully agree with you that just adding percentages is stupid, especial when taking the dividends into account:

Sometimes people write it as such:
Buy, Div, Div reinvestment, sell
0.15%+0.15%+0.15%+0.15% = 0.60%
Itā€™s not 0.60% as thatā€™s not how to math. People please just refrain

People also sometimes forget that stocks donā€™t yield 100%, in general with the yields the fx fee is barely noticeable (just as in my previous example, net 0.30 vs 0.29 with a significant difference in yield).

What I had in my calculation was for example (taken from excel and took out values):
Previous year net amount + cap growth rate * Previous year net amount + div yield * Previous year net amount * (1-0.0015)^2 + Monthly deposit * 12 * (1-0.0015)

I swear in a spreadsheet it looks readable :joy: Repeat this for the number of years.

The amount you lose from the fee itself will be lower than 0.15% as you never end back up with your initial again thatā€™s why I added some growth rates in there. The diffrence mostly comes from the initial buy and sale as those are on the whole 100% and not the yield.

All in all donā€™t add percentages like itā€™s a normal number

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lets not forget the time value of money too :wink: we have to discount against inflation, plus more calculations that already have negative impacts on our money in a scale far greater the the nominal fx adjustment :zipper_mouth_face:

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I could be wrong but I imagine itā€™s because youā€™re often buying CFDs rather than the underlying stock. eToro makes a big deal out of eating these sorts of cost but I reckon they probably donā€™t have to pay 'em in a lot of cases.