The Social Trading Platform eToro has recently launched the eToro CopyPortfolios (former eToro CopyFunds), a new and innovative investment product that promises to give users the ability to:
- invest in a professional way
- simplifying the diversification process
- at no additional cost
- with an innovative strategic allocation process
With this move, the Social Network eToro makes yet another step forward in becoming a complete platform for all types of investment, from Retail Trading to Social Trading, up to Fund Investing.
So, let’s see what they are and how eToro CopyPortfolios work.
(Are you also looking for a tutorial to learn how to use all the eToro features effectively? Here is our eToro Guide)
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What are the eToro CopyPortfolios?
According to the eToro CEO, Yoni Assia:
“Our CopyPortfolios are a unique investment instrument, which allows you to invest in a group of assets, bundled together according to different market strategies.”
There are two categories of eToro CopyPortfolios:
- Market CopyPortfolios: they include stocks, commodities, indices, and any other assets with the exception of physical persons
- Top Trader CopyPortfolios: they include only real traders
By investing in CopyPortfolios you do not invest in a single asset or person, but on the whole range of assets included within the CopyPortfolios, according to a resource allocation strategy managed with the use of several algorithms and supervised by the eToro’s Investment Committee.
It’s a kind of Copy Trading software actively managing a fund for you.
Obviously, the figures invested by the users will be then managed proportionally, depending on the size of each investment.
How do eToro CopyPortfolios work?
The functioning of an eToro CopyPortfolios is very similar to that of a normal investment fund, headed by a manager who decides where and how to invest the money of the fund investors.
However, there are some substantial differences.
With eToro CopyPortfolios, the user does not deliver the capital in the hands of the manager, but he simply instructs the manager (eToro) to open/close positions (of eToro CFDs) on his own account, according to the investment strategy adopted by the algorithms and proportioned to his capital size.
If, in a normal fund, the investor must pay the full amount of the shares he wants to purchase, with eToro CopyPortfolios, being a replication of CFDs positions, you can take advantage of the Financial Leverage effect. This means that you can invest, and be positioned in the market, for figures much larger than the capital you actually own. While it’s true that with Leverage also the risks increase, if used in the right way, it can become an opportunity to those who do not have huge amounts of capital to participate in the market.
We can say that the eToro CopyPortfolios have many things in common with ETFs (Exchanged Traded Funds), but even here we can find an important difference. ETFs do not contemplate Short positions, but only Long. As we shall see shortly, the Top Trader CopyPortfolios, replicating the strategies of traders, obviously include short positions. But that’s not all, even a particular Market CopyPortfolios includes short positions in certain conditions, and this is definitely an innovative particularity.
Analyzing the eToro CopyPortfolios Prospectus
Each eToro CopyPortfolios comes with a sort of information Prospectus (something like a KIID).
Within the Prospectus, you can observe many interesting data, including:
- monthly performance (simulated) of the fund over the previous three years
- the Risk Scores, a proprietary eToro parameter that gives a score from 1 to 10 to the inherent risk level
- the graph on the allocation/exposure where you can observe on what assets the fund invested, when, and in what proportion
- other useful and interesting information, including other charts to better analyze the fund structure
The eToro CopyPortfolios Prospectus is virtually identical to the eToro Popular Investor profile. Therefore, if you are already an expert with the latter, you should have no problems; otherwise just follow the previous link to our detailed guide.
Types of eToro Copy Portfolios
Let’s see the features and the offer of the two types of eToro CopyPortfolios.
– eToro Market CopyPortfolios
The eToro Market CopyPortfolios are comprised of CFDs on stocks, commodities, indices and ETFs.
Each fund is constructed and managed using complex algorithms that decide the assets, the parameters and the strategic allocation of capital, with periodic adjustments and rebalancing.
All this is overseen by the eToro’s Investment Committee, which collaborates with the investment bank Barclays for support and consulting services.
Here is the complete list of the current eToro Market CopyPortfolios:
The BigBanks CopyPortfolio diversifies your investment across the financial sectors, comprising banks, multinational financial services providers and other financial institutes in one complete portfolio.
The BigTech CopyPortfolio comprises leading companies from sectors like technology, telecommunications, entertainment, e-commerce, software solutions and more.
The InTheGame CopyPortfolio comprises leading gaming companies and offers excellent exposure to one of the hottest and biggest markets in the world.
The AllSTocks CopyPortfolio is built from the world’s leading indices. It’s like investing in all of the biggest stocks, from the biggest economies, with a single click of the button.
The GoldenEnergy CopyPortfolio comprises leading ETFs (Exchanged Traded Funds) from the energy sector and offers a broad exposure to CFD stocks and commodities.
The USA-ETF CopyPortfolio gives you a complete and comprehensive exposure to the entire US economy, with High-Yield American bonds and the CFD stocks of various US companies.
The GlobalETF CopyPortfolio offers excellent exposure to every market in the world, except the USA, therefore to markets of Europe, Australia, Japan, China e the Far East, Russia, Brazil and many emerging markets.
The SectorETF CopyPortfolio is perfect for the investors who believe the USA will continue to dominate the financial markets, offering extensive exposure to a wide variety of sectors: Real Estate, healtcare, finance, infrastructure, and more.
The FoodDrink CopyPortfolio comprises leading companies from the food and beverages manufacturers and suppliers, a broad large market that is always in demand.
The PanicMode CopyPortfolio is definitely one of the more innovative, offering a strong and comprehensive position against crashing world markets. It comprises Short Positions on major market indices, and Long Positions on Gold and Silver.
(No longer available) The TrumpWins CopyPortfolio was created in order to best capture the effect of Donald Trump’s victory on the markets, by combining different Short and Long positions on a range of strategic assets.
The TravelKit CopyPortfolio comprises companies from the Travel and Lifestyle sectors (hotel, aviation, global financial services providers and more) to enjoy a wide exposure to the results of positive financial condition in time of low interest, financial growth, increased consumption and more.
The latest, the most innovative, especially if we consider the assets that are included in this fund: the cryptocurrencies. CopyPortfolios offers a portfolio diversified on those criptocurrencies with a market capitalization of at least 1 billion.
– eToro Top Trader CopyPortfolios
The eToro TopTrader CopyPortfolios are funds that replicate real live eToro traders (also called Popular Investors).
These traders are carefully selected using several advanced algorithms, which monitor, insert, manage and automatically replace the traders within the fund.
Obviously, always under the supervision of the eToro’s Investment Committee.
Here is the complete list of the current eToro Top Trader CopyPortfolios:
The GainersQtr CopyPortfolio (quarterly gainers) is built on sustainable trading behavior, which means selection up to 50 ‘solid’ traders and allocating the weights evenly among them.
The ActiveTraders CopyPortfolio rallies a large number of frequent traders with a proven track record. The algorithm selects the ones who are most likely to achieve the best Risk/Reward ratio in the following quarter.
The TrendingR7 CopyPortfolio comprises the Top 10 fastest gainers by copiers on the platform, with a Risk Score of 7 and below.
The CopiersPlusR4 is comprised of ‘solid’ traders, with a Risk Score of 4 and below, which have shown a growth in copiers during the last month.
– eToro Partner CopyPortfolios
EToro’s Partners CopyPortfolios are another recent innovation.
We are talking about CopyPortfolios created not by eToro and its investment department, but with the collaboration of other external partners.
Here are the ones created so far:
Created by WeSafe. This CopyPortfolio was developed by the quant portfolio managers at WeSave, the first French online private banking platform. It is a portfolio that invests in all markets through ETF, designed to achieve long-term returns.
Created by TipRanks. This fund is based on SEC’s public information about the market positions held at Berkshire Hathaway, the famous investment company of Warren Buffett, the legendary investor also called the “Oracle of Omaha.”
Created by Meitav Dash. Created in partnership with one of Israel’s leading investment companies, the objective of this fund is to beat the MSCI ACWI index, one of the major references for world equity markets.
Created by TipRanks. This fund is based on the SEC’s public information about the market positions held at Carl Icahn Enterprises, the company of the famous “corporate raider” Carl Icahn, one of the most aggressive investors of our time.
Created by TipRanks. This fund is based on SEC’s public information about the market positions held at Greenhaven Associates Inc, the small investment company of Edgar Wachenheim, with only 6 employees managing $ 5 billion in assets.
eToro CopyPortfolios Minimum Deposit
The minimum deposit to be able to invest in a eToro CopyPortfolios is $ 5,000.
The reason for such a high minimum capital is justified and due to the high level of diversification.
Investing on an eToro CopyPortfolios means automatically replicate different CFD (Contract For Difference) positions on your account, even several dozens, keeping them open even for long periods in the case of Market CopyPortfolios.
To ensure you have the necessary margin capital to replicate all the positions, with the correct proportions, you need a minimum capital of a certain size, that eToro has precisely quantified at $ 5,000.
How long should I keep the money invested in CopyPortfolios?
The eToro CopyPortfolios, especially the Market CopyPortfolios, being actual investment funds, are meant as investments with long-term horizon.
Nevertheless, you can terminate your investment at any time, without any additional cost or commission, as is generally the case with classic ‘old style’ funds.
eToro Copy Portfolios Costs
One of the most interesting features of the eToro CopyPortfolios, a feature that sets them apart in a very advantageous way from regular funds, is the absence of an effective management fee.
If in normal investment funds you usually pay a yearly 5% in management fee, for the eToro CopyPortfolios service you do not pay anything extra.
The costs for this service are those already comprised on eToro for the opening of new positions, namely the spread costs and rollover costs for overnight positions (you can find the details here).
In short, nothing new: you pay for the opening, closing and the overnight maintenance of the positions, as it normally happens with the eToro copy trading system, or with any other broker.
In the case of investment in Market CopyPortfolios, being strategies that buy stocks and hold them in the portfolio for long period, we need to consider and keep an eye on Rollover costs, since the use of too much leverage may weight on the investment convenience.
Our Opinion on eToro CopyPortfolios
Our opinion on eToro CopyPortfolios is definitely positive.
Having been launched on November 8, 2016, it is definitely too early to reason and evaluate the actual performance of these ‘managed by algorithms’ funds.
However, the possibilities they offer and the relative absence of service costs will definitely make it very interesting.
Here on InvestinGoal we have always preached an approach to Social Trading in an investment manner (so much so that we have created a guide in this regard), more than in a trading manner.
The eToro CopyPortfolios, in this sense, are a good synthesis.
More specifically, regarding the TopTrader CopyPortfolios, i.e. the funds that replicate people, I think they can be a good alternative for those who are starting out and cannot find the best eToro traders by themselves.
However, I believe that knowing how to autonomously handle eToro, building with professionalism your personal CopyTrading strategy, is still the best method to get the most out of this Social Trading Network, and the knowledge on how to best do it is here on InvestinGoal.
As for Market CopyPortfolios, they are really interesting for those investors who already have experience and want to take advantage of a service similar to that of a classic investment fund, but with no additional cost and with a relatively low entry capital (if indeed compared to traditional investment funds entry capital).
We will keep eToro CopyPortfolios monitored in the coming months so that we can update this post with real data and feedback.