Trading 212 Review: Crucial Insights Before You Begin Your Journey

It’s free to create an account with Trading 212, and there are no membership fees. Despite this, you may wonder how Trading 212 generates revenue. The primary sources of income for Trading 212 include currency conversion fees and encouraging the use of risky Contracts for Difference (CFDs), which are derivative products. Additionally, Trading 212 may earn revenue through securities lending, where they lend out shares to borrowers and receive interest and collateral in return. While the platform offers commission-free trading, these other revenue streams contribute to its profitability.

Currency conversion fees

When using Trading 212 from the EU, purchasing ETFs or stocks in USD incurs a currency conversion fee of 0.15%. This fee is applied to transactions involving the conversion between euros (€) and US dollars (USD). Despite the platform’s primary focus on commission-free trading, these currency conversion fees contribute significantly to its revenue model.

Trading 212 actively promotes Contracts for Difference (CFDs)

CFD is a financial instrument known for its high risk. While our review focuses on Trading 212 Invest, it’s imperative to examine their CFD offerings as they form a significant portion of the company’s revenue. A CFD operates as a derivative, enabling speculation on price movements of underlying assets like stocks or currencies without owning them outright. Instead, it involves a contractual agreement between you and Trading 212, where you exchange the difference in the asset’s price from the contract’s opening to its closure.

The primary risk associated with CFDs lies in their high leverage, allowing control over sizable positions with minimal capital. While leverage can amplify profits, it equally magnifies losses, potentially exceeding your initial investment. Moreover, CFDs entail complexity, posing challenges for novice investors. Before engaging in CFD trading, meticulous consideration of the contract terms, including fees, margin requirements, and associated risks and rewards, is crucial. It’s important to note that statistically, the majority of investors incur losses when trading CFDs.

ETFs Fees

Trading 212 boasts the title of being the most cost-effective broker for European investors. As an illustration, purchasing €1,000 worth of the iShares Core S&P 500 ETF (IE00B5BMR087) comes at zero cost through their platform. This competitive pricing underscores Trading 212’s commitment to providing affordable investment opportunities for its clientele.

Investors seeking diversified exposure to global markets may find Vanguard FTSE All-World UCITS ETF (VWRL) an appealing option. This ETF offers broad coverage across developed and emerging markets, encompassing thousands of companies worldwide. With holdings spanning various sectors and regions, VWRL provides a convenient way to access the entire global equity market through a single investment vehicle.

On the other hand, for those interested in emerging market opportunities, iShares MSCI Emerging Markets UCITS ETF (EIMI) offers targeted exposure to stocks from emerging economies. With holdings in countries like China, India, Brazil, and South Korea, EIMI provides investors with the potential for high growth and diversification beyond developed markets. These two ETFs, VWRL and EIMI, offer distinct investment strategies catering to different investor preferences and objectives, thereby enhancing portfolio diversification and risk management.

Conveniences of Trading 212

It’s free to create an account with Trading 212, and there are no membership fees. Despite this, you may wonder how Trading 212 generates revenue. The primary sources of income for Trading 212 include currency conversion fees and encouraging the use of risky Contracts for Difference (CFDs), which are derivative products. Additionally, Trading 212 may earn revenue through securities lending, where they lend out shares to borrowers and receive interest and collateral in return. While the platform offers commission-free trading, these other revenue streams contribute to its profitability.

Currency conversion fees

When using Trading 212 from the EU, purchasing ETFs or stocks in USD incurs a currency conversion fee of 0.15%. This fee is applied to transactions involving the conversion between euros (€) and US dollars (USD). Despite the platform’s primary focus on commission-free trading, these currency conversion fees contribute significantly to its revenue model.

Trading 212 actively promotes Contracts for Difference (CFDs)

CFD is a financial instrument known for its high risk. While our review focuses on Trading 212 Invest, it’s imperative to examine their CFD offerings as they form a significant portion of the company’s revenue. A CFD operates as a derivative, enabling speculation on price movements of underlying assets like stocks or currencies without owning them outright. Instead, it involves a contractual agreement between you and Trading 212, where you exchange the difference in the asset’s price from the contract’s opening to its closure.

The primary risk associated with CFDs lies in their high leverage, allowing control over sizable positions with minimal capital. While leverage can amplify profits, it equally magnifies losses, potentially exceeding your initial investment. Moreover, CFDs entail complexity, posing challenges for novice investors. Before engaging in CFD trading, meticulous consideration of the contract terms, including fees, margin requirements, and associated risks and rewards, is crucial. It’s important to note that statistically, the majority of investors incur losses when trading CFDs.

ETFs Fees

Trading 212 boasts the title of being the most cost-effective broker for European investors. As an illustration, purchasing €1,000 worth of the iShares Core S&P 500 ETF (IE00B5BMR087) comes at zero cost through their platform. This competitive pricing underscores Trading 212’s commitment to providing affordable investment opportunities for its clientele.

Investors seeking diversified exposure to global markets may find Vanguard FTSE All-World UCITS ETF (VWRL) an appealing option. This ETF offers broad coverage across developed and emerging markets, encompassing thousands of companies worldwide. With holdings spanning various sectors and regions, VWRL provides a convenient way to access the entire global equity market through a single investment vehicle.

On the other hand, for those interested in emerging market opportunities, iShares MSCI Emerging Markets UCITS ETF (EIMI) offers targeted exposure to stocks from emerging economies. With holdings in countries like China, India, Brazil, and South Korea, EIMI provides investors with the potential for high growth and diversification beyond developed markets. These two ETFs, VWRL and EIMI, offer distinct investment strategies catering to different investor preferences and objectives, thereby enhancing portfolio diversification and risk management.

Conveniences of Trading 212

Conveniences of Trading 212	Availability
Savings plan	✓ Yes
Fractional shares	✓ Yes
Customer support	✓ Email, chat
Taxes (Italy)	Declarative regime
Taxes (Belgium)	Not handled by Trading 212
Mobile app	✓ Yes
Web app	✓ Yes
Ease of use	⭐ 3/5
Children accounts	✗ No
Joint accounts	✗ No
Business accounts	✗ No

Customer support

Trading 212 boasts robust customer support services, characterized by prompt responses and efficient assistance. Users can easily reach out for help through the platform’s chat and email support channels. Whether users have inquiries, encounter technical issues, or require guidance, Trading 212’s customer support team is readily available to provide timely and helpful assistance. This dedication to customer service enhances the overall user experience and instills confidence in investors, knowing that their concerns will be addressed promptly and effectively.

Automated savings plans

Trading 212 offers an automated savings plan feature known as “AutoInvest.” This innovative tool empowers users to construct a diversified portfolio tailored to their individual circumstances. With AutoInvest, investors can set up automated contributions to their portfolio, allowing for seamless and hassle-free investing. This feature not only streamlines the investment process but also enables users to maintain a disciplined approach to building wealth over time.

Trading 212’s “AutoInvest” feature is designed to simplify the investment process and make it more accessible to all users, regardless of their level of experience. Here’s more information about how it works and some examples of how investors can benefit from it:

1. Automated Contributions: With AutoInvest, users can set up recurring contributions to their investment portfolio. For example, an investor may choose to invest $100 every month into a diversified portfolio of stocks and ETFs.
2. Customization: Users have the flexibility to customize their AutoInvest settings based on their unique financial goals and risk tolerance. They can select the frequency of contributions, the amount to invest, and the allocation of funds across different assets.
3. Diversification: AutoInvest allows investors to build a diversified portfolio by spreading their investments across various asset classes, industries, and regions. This helps reduce risk and maximize potential returns over the long term.
4. Long-Term Investing: By automating their investment contributions, users can adopt a disciplined approach to long-term investing. They can take advantage of dollar-cost averaging, which involves investing a fixed amount of money at regular intervals, regardless of market fluctuations.
5. Hands-Free Management: Once set up, AutoInvest operates automatically, requiring minimal intervention from the user. This hands-free approach to investing allows users to focus on other aspects of their financial life while their portfolio grows over time.

Overall, Trading 212’s AutoInvest feature offers a convenient and efficient way for investors to build wealth gradually and achieve their financial goals. Whether saving for retirement, building an emergency fund, or pursuing other objectives, AutoInvest empowers users to take control of their financial future with ease.

Fractional shares

Fractional shares are an integral feature offered by Trading 212, enabling investors to implement popular investment strategies like euro-cost averaging with ease. Euro-cost averaging involves investing fixed amounts at regular intervals, such as monthly, regardless of market conditions. As most individuals receive their income on a monthly basis, aligning investment contributions with this schedule makes practical sense.

With fractional shares, Trading 212 allows investors to purchase a portion of a stock or ETF for as little as €1. This flexibility empowers investors to build their portfolios gradually over time, without the need for large lump-sum investments. By offering fractional shares, Trading 212 facilitates accessibility and affordability in investing, catering to a wide range of investors with varying financial goals and resources.

Some popular fractional shares often sought after by investors include:

1. Tesla (TSLA)
2. Amazon (AMZN)
3. Apple (AAPL)
4. Alphabet (GOOGL)
5. Microsoft (MSFT)

These companies are widely recognized and often sought after by investors due to their strong performance, innovative products and services, and significant market presence. 

Setting up an account

Conveniences of Trading 212 Availability Savings plan ✓ Yes Fractional shares ✓ Yes Customer support ✓ Email, chat Taxes (Italy) Declarative regime Taxes (Belgium) Not handled by Trading 212     Mobile app ✓ Yes Web app ✓ Yes Ease of use ⭐ 3/5 Children accounts ✗ No Joint accounts ✗ No Business accounts ✗ No