Broker Check: Degiro Review

Degiro user-ratings: $0
10/10
10 of 10 points 1 reviews
  • Asset varierity - 10/10
    10/10
  • Trading platform - 10/10
    10/10
  • Support - 10/10
    10/10
  • Fees - 10/10
    10/10
  • Deposit/Withdrawal - 10/10
    10/10

Facts about the company:

  • Type: Stock Broker 
  • Regulation: AFM (Netherlands), DNB (Dutch), FCA (UK) 
  • Minimum deposit: $0
  • Demo account: not available
  • Markets: Shares, Investment Funds, ETFs, Futures, Leveraged Products, Bonds, Options, Warrants
10/10
Comments Rating 10/10 (1 review)

Pros

  • Headquarters inside EU
  • Low trading fees
  • Low stock and ETF fees
  • Innovative platform 
  • No hidden costs

Cons

  • Higher trading fees for Asian and smaller European stock exchanges
  • High USD margin rate

Order fees with DEGIRO

At DEGIRO, the order fees consist mainly of a fixed price and a percentage fee. This mix makes determining the correct order fee in advance somewhat complicated and imprecise. In addition, there are different prices for the same shares on different stock exchanges.

Screenshot of the DEGIRO landing page

Example for the purchase of a German share via DEGIRO

If you buy the share on XETRA, you pay a fixed price of $ 2.00 + 0.026% of the cash amount for each transaction (buy or sell). Suppose you want to buy RWE shares for $250 at a price of $22.15. Your order fees are then made up as follows:

The fixed price per transaction is $2.00. A percentage fee of 0.026% of the money amount is now added to this fixed price. The money amount is calculated by multiplying the number of shares by the purchase price. With your 250€ you can buy a total of 11 shares at a price of $22,15. $250 : $22,15 = 11,2867 shares

Since you can only buy whole shares on the stock exchange, the number of shares is rounded down to 11. To buy the 11 shares at a price of 22.15 you need a cash amount of (11 * $22.15 ) = $243.65. This amount of money is now the basis for calculating the percentage fee. $243.65 * 0.026 % = 0.0633 = rounded down to $0.06 The total cost of the transaction is $243.65 + $2.00 fixed price + $0.06 percentage fee =$245.71This corresponds to a fee of $2.06 for this transaction. To purchase the 11 RWE shares you have to pay a total amount of $245.71.

Example for the sale of a German share at DEGIRO

Suppose you want to sell the 11 RWE shares later for $35. Now your transaction fee is calculated as follows:

11 shares * $35 = $385.00. This amount of money is now the basis for calculating the percentage fee ($385.00 * 0.026% = 0.093 rounded $0.09). In addition, you must pay the fixed price of $2.00 for the transaction.Your payout amount is $385.00 – $0.09 – $2.00 = $382.91 This corresponds to a fee of $2.09 for this transaction.

Support available:7:00am to 9:00pm
Telephone:+45 89 88 62 81 
Adress:orders@degiro.co.uk
Languages:English

Purchase and sale of a German share on the Frankfurt Stock Exchange

If you would make the same purchase and sale on the Frankfurt Stock Exchange, you would have to pay the following fees: Purchase: $243.65 + $7.50 fixed price + 0.098% percentage fee (243.65 * 0.098% = 0.2387 rounded) = $0.24. The total cost of this transaction now amounts to $243.65 + $7.50 fixed price + $0.24 percentage fee = $251.39. This corresponds to a fee of $7.74 for this transaction. Please note that if you only have $250 available, you cannot purchase 11 RWE shares at the price of $22.15! You must either buy fewer shares or purchase them at a lower price. If your account balance is insufficient, the order will be rejected by the broker.

If the 11 shares are sold later at $35, you will pay a fee of $7.50 fixed price + the percentage fee of 0.098%$385,00 * 0,098 % = 0,3773 rounded = $0,38 = $7,88 . The total cost of the sale is $7.50 fixed price + $0.38 percentage fee = $7.88. This amount will be retained by the broker and your credit will be $385 – $7,88 = $377,12.In both cases, you have made a price gain of $141,35. Your actual profit when trading via DEGRIRO on the XETRA exchange is $141.35 – $2.06 (fees for buying) – $2.10 (fees for selling) = $137.19. If you trade via the Frankfurt Stock Exchange, your fees are $7.74 for the purchase and $7.8 8 for the sale.

This leaves you with only $125.73 of your price gain of originally $141.35 – $7.74 – $7.88. Please note that if you only have $250 at your disposal, you cannot purchase 11 RWE shares at a price of $22.15! You must either buy fewer shares or purchase them at a lower price. If your account balance is insufficient, the order will be rejected by the broker. If the 11 shares are sold later at $35, you will pay a fee of $7.50 fixed price + the percentage fee of 0.098%. $385,00 * 0,098 % = 0,3773 rounded = $0,38 = $7,88. The total cost of the sale is $7.50 fixed price + $0.38 percentage fee = $7.88. This amount will be retained by the broker and your credit will be $385 – $7,88 = 377,12 $.

In both cases, you have made a price gain of $141,35. Your actual profit when trading via DEGRIRO on the XETRA exchange is $141.35 – $2.06 (fees for buying) – $2.10 (fees for selling) = $137.19. If you trade via the Frankfurt Stock Exchange, your fees are $7.74 for the purchase and $7.8 8 for the sale. This leaves you with only $125.73 of your price gain of originally $141.35 – $7.74 – $7.88.

At foreign stock exchanges it becomes even more confusing

Suppose you want to trade stocks on the US stock exchanges. The calculation of order fees is now a little more complicated. For this transaction, a fixed price in Euros of $0.50 is calculated plus a fee of $0.004 (US dollars) per share. The price of the share is now irrelevant. Suppose you want to buy 50 shares. For the purchase you pay $0.50 fixed price + (50 * 0.004 $ per share) 0.20 $. You have to pay a part of the fee in EUR and a part in US dollars (USD). The problem is that you probably don’t have US dollars (USD) in your account. You would therefore have to exchange Euros for US dollars (USD) at the current exchange rate of $0.20. In addition, you will need US dollars (USD) to purchase the shares.

The exchange of the currency from EUR to USD can be done automatically via Auto FX Trader. A fee of 1 % is charged for this. However, what you do not know in advance is the exact exchange rate at the moment of the transaction. You will only know what your actual order fees are after you have carried out a transaction. It always depends on the current exchange rate. The order fee display is only an estimate.

Additional fees (deposit or inactivity costs)

DEGIRO currently charges somewhat confusing annual depot or inactivity costs. Inactivity costs are costs that can be charged if no more transactions are carried out. This is often the case when shares are bought with a one-off payment and the positions are only held (buy and hold).

Brokers earn their money with the trading fees. Customers should therefore buy and sell often. If you trade little, your broker earns (too) little. The broker needs additional sources of income.

DEGIRO charges the following fee (original wording):

The fee is 0.25% of the account balance (the highest value of the calendar year) or a maximum of $2.50 per year and per exchange (with the exception of XETRA, Frankfurt, and EUREX). The fee is charged if you execute at least one transaction within a calendar year or hold the position on a foreign stock exchange.

Example:

Your entire portfolio has a value of $5,000 and you have carried out transactions on the XETRA, Euronext Amsterdam, and NASDAQ exchanges. You also hold an open position on the New York Stock Exchange:

  • XETRA 0.00 $ (position & transaction home market)
  • Euronext Amsterdam 2,50$ (transaction)
  • NASDAQ 2.50$ (transaction)
  • NYSE 2.50$ (position)

The costs for the “establishment of trading arrangements” in this calendar year are one-off: 3 x 2.50 $ = 7.50 $

This means that if you trade shares on a foreign stock exchange, you pay up to $2.50 per exchange. If you have shares in your custody account that are traded on the NYSE, you pay up to an additional $2.50 per year.

Order types with DEGIRO

DEGIRO offers only the standard order variants.

  • Market Order: Buy or sell at the next possible price
  • Limit order: buy or sell at the specified price or better
  • Trailing Stop: automatic adjustment of the counter order (Stop Loss) in percent or amount at the current price

As order combination there are the Stop Loss Order and the Stop Limit Order.

The Stop Loss Order is the unlimited counter order to the entry order. For long positions, it is a sell stop order and for short positions, it is a buy stop order. Unlimited means that when the specified stop price is reached, the order becomes a Market Order and is executed at the next possible price. This price can be better or worse than the desired price.

In the case of a buy, a Stop Limit Order means that the order will not be executed until the current price rises above the desired price. The Stop Limit Order then becomes a normal Buy Limit Order.

In the case of a sell, a Stop Limit Order means that the order will not be executed until the current price falls below the desired price. The Stop Limit Order then becomes a normal Sell Limit Order.

The useful Bracket Orders are not currently offered by DEGIRO. A Bracket Order is a combination of an Entry Order, Profit Target Order, and Loss Limit Order. It can be used for long or short positions.

Example of a Bracket Order

After opening a long position, two sell orders (stop loss and sell limit) are automatically placed. If one of the two sell orders is executed, the remaining order is automatically canceled. For short positions, two buy orders (Stop Loss and Buy Limit) are placed. If one of the two sell orders is executed, the remaining order is automatically canceled.

Bracket orders have the advantage that you do not have to monitor the orders constantly.

Product range and stock exchanges

DEGIRO offers its customers access to the usual financial products such as shares, CFDs, ETFs, investment funds, futures, options, warrants, bonds, and certificates. “Real” Forex trading (currency trading) is currently not possible.

The largest stock exchanges such as XETRA, NYSE, and NASDAQ are available as trading venues. But access to smaller exchanges in Europe, Canada, Australia, and Asia is also offered. In 95% of cases, however, access to the major stock exchanges is sufficient.

An important advantage is that the various products (such as shares, ETFs, futures, options) can be traded in the respective currency on the home exchanges. It should be noted, however, that each transaction (purchase or sale) is subject to an additional currency exchange fee (standard setting of DEGIRO).

Handling of order placements (order mask)

Buy or sell orders are entered in a separate order mask. The order mask is kept very simple and offers two variants for the selection of the position size. However, these two variants can lead to confusion, especially for beginners.

First, you select the desired financial product (for example shares) and determine whether you want to buy or sell. Then you select the type of order (for example, market or limit) and, if necessary, the price for the limit.

Now you need to define the size of the position. There are two ways to do this. Either you enter the appropriate number or an amount and the number will be calculated automatically based on the selected limit price. What is actually a good idea has, in my experience, caused confusion, especially among beginners. It tries to enter both values (number and amount) at the same time.

Finally, the validity period of the order must be selected. This can be valid for one day or unlimited.

Valid for one day means that the order is automatically deleted at the close of trading on the day it is placed. The order must be re-issued every day.
Indefinite means that the order remains valid until it is manually deleted.
The following must be observed when placing orders. If the desired limit price is too far away from the current price, the system will reject the order placement. This is not the case with every broker and is a disadvantage of DEGIRO.

Spreads (difference between buy and sell price)

The profitability of our own trading activities depends not only on the trading method and fees but also on the difference (spread) between the buying price (bid) and selling price (ASK). The larger this difference is, the smaller the own profit for the same price movement.

The spread is especially important for day traders who speculate on minimal price changes. Traders or investors who want to use larger price fluctuations or shares as a long-term investment can neglect the spread (provided it is customary on the stock exchange).

DEGIRO does not provide any specific information on the size of the spreads. However, our observation does not show any significant deviations from the spreads customary on the stock exchange.

Chart software and real-time prices

DEGIRO does not offer its own charting software worthy of the name. It is more a rough overview of the price development over a limited period of time. Investors who also want to follow the price trend must use third-party providers. It should then be noted that the price information can vary for individual securities.

There is therefore also no chart trader. With a chart trader, you can place your order directly in the chart. This is often clearer than with a pure order ticket.

DEGIRO offers its customers real-time prices. These are either free of charge or subject to a fee, depending on the respective stock exchange. Price data for the most important stock exchanges (XETRA, NYSE, NASDAQ) are 15 minutes delayed or subject to a fee.

Dealing with foreign currency products

Investors who want to trade not only European shares and some selected US shares in EUR via the XETRA stock exchange need foreign currencies in their securities account. For example, investors who want to trade shares on the NYSE or the NASDAQ in the USA need US dollars (USD).

DEGIRO does not currently offer the possibility of holding different currencies (for example EUR and USD) in the securities account at the same time. This has the following consequences for the customer:

For example, when buying shares on a USD basis, the required amount of money will be converted from EUR to USD in real-time at a charge. If the shares are sold, the amount of money is exchanged back from USD to EUR in real-time, for which a fee is charged. This has advantages, but also serious disadvantages.

  • Advantage: The client always has EUR in his account.
  • Disadvantage: Price gains and dividend payments in USD are immediately exchanged into EUR for a fee.
  • Advantage: Price gains in USD can increase if the EUR/USD exchange rate improves.
  • Disadvantage: Price gains in USD can decrease if the EUR/USD exchange rate deteriorates.
  • Advantage: Exchange rate gains in USD can decrease if the EUR/USD exchange rate improves.
  • Disadvantage: Exchange rate losses in USD can increase if the EUR/USD exchange rate deteriorates.
  • Big disadvantage: It is not possible to keep USD in the account in order to be able to buy USD based stocks later without having to pay exchange fees again.

Clarity (where can you find what?)

The clarity of the trading platform is acceptable. After a certain training period and consistent search, you will find all important information and operating elements. For beginners and long term investors (who trade little), it is sufficient in our opinion.

For traders who want to trade smaller price fluctuations in real-time, the trading platform is unsuitable. Who knows other trading platforms will miss one or the other very much.

Security of your deposits with DEGIRO

Your money is not kept at DEGIRO but in a separate depository. Should DEGIRO run into financial difficulties, your deposits will not be affected. The depository is a money market fund. DEGIRO uses Morgan Stanley Investment Management or Fund share.

Money market funds are not subject to statutory deposit insurance. If irregularities occur with Morgan Stanley Investment or Fund share, your deposits may be affected.

conclusion

In terms of trading fees, DEGIRO can be a real alternative to other well-known online brokers and banks. I see an advantage over German brokers and banks in the taxation of price gains. The investor can make his settlement at the end of the year and immediately offset losses against profits. Capital gains tax is not deducted immediately every time profits are realized.

As far as security is concerned, investors should be aware that there is no statutory deposit insurance according to German standards.

Traders who want more than just an order mask and a rough overview of their portfolio and the markets will be disappointed here. The lack of useful chart software, many useful order variants, and an API interface is in my opinion a big disadvantage.

DEGIRO is suitable for investors who want to invest smaller amounts in shares or ETFs at a reasonable price and who are able to trade on XETRA.


Most asked questions:

How is DEGIRO regulated?

Degiro is regulated by a total of three regulations: the Netherlands Authority for the Financial Markets (AFM), the Dutch Central Bank (DNB), and last but not least, the Financial Conduct Authority (FCA).

Are accounts for free?

For creating an account, there are no hidden costs that tell us that there are no initial or setups fees new traders have to worry about.

For whom is DEGIRO a fit?

Traders who want to trade on the stock market will be pleased with the offering of DEGIRO. Moreover, it is a good broker for traders in search of an execution-only stockbroker.

Is DEGIRO Taking care of the taxes?

At DEGIRO you are responsible for taxing your capital gains yourself. You cannot issue an exemption order. Withholding tax on dividends is withheld by DEGIRO.

One Response

  1. Andre Witzel September 13, 2020

Leave a Reply

User Review
  • Sending
    Asset varierity
  • Sending
    Trading platform
  • Sending
    Support
  • Sending
    Fees
  • Sending
    Deposit/Withdrawal