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eToro is letting Australians trade on Wall Street commission-free, which it says presents 'a generational opportunity'
Share trading platform eToro has cut its commission to zero for Australians trading US stocks.
It has also introduced fractional investing, allowing Aussies to buy fractions of a share in US companies like Amazon which typically carry a prohibitive share price.
As volatility draws more investors into the sharemarket, eToro Australia general manager Robert Francis told Business Insider Australia that it COVID-19 has presented a "generational opportunity" for traders.
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With great volatility comes great opportunity, and as masses of Australians are drawn into the sharemarket, eToro is seeing a major one of its own.
With the trading platform having racked up more than 13 million users globally, it now sees Australia as its next big market, slashing commissions on US trades to zero.
"Given what we've seen with COVID-19, there is a lot of interest right now in investing and for a lot of young people, this is a generational opportunity," Australia general manager Robert Francis told Business Insider Australia.
"What we've got is an opportunity for the people to invest in companies that are at the forefront of change, particularly in the realm of technology."
It's why any Australian user that buys and sells US-listed stocks, which include the likes of Australia's Atlassian, won't pay a cent in commission on the platform -- as long as it's not a short or a leveraged buy.
It makes it among the first in Australia to do so, joining Australia's own Stake to offer zero-commission US trading locally.
Given the sheer scale and number of American tech companies, it makes sense that Australians and eToro alike would look to the land of the free to invest, with the US representing around 80% of the platform's offering. Nor is it a coincidence that the broker is looking squarely at a younger demographic.
"Firstly, there's a lot of interest from millennials who don't want to work a nine-to-five and they're looking for a way to make their money work for them," Francis said. "Secondly, as baby boomers get older, we're going to see the greatest transfer of wealth in history and we want to be able to build trust with this younger generation and show them what we can do for them."
But until inheritances flow, many aren't exactly flush with cash. It's this reality that eToro is targeting with its second big launch this week – allowing Australians to buy fractional shares.
Fractional investing is exactly what it sounds like, enabling traders to buy part, or a fraction, of an investment like a share. That's because while Australian share prices don't typically run beyond a few hundred dollars at most, US companies have a tendency to show off the comma.
Think Amazon is the future of shopping? A single share is going to set you back around $US2,500 ($3,800) right now. If you think that's pricey, don't even look up what a class A share in Warren Buffett's Berkshire-Hathway costs.
However, with fractional investing, Australian users will be able to buy as little as 0.1% of a share from Amazon, alongside other household names like Facebook, Microsoft and Netflix. Combining commission-free investing with zero commissions then, eToro's strategy begins to make a lot of sense.
"What this means is that Australians can drip-feed some savings into companies they like at a time when they're not getting paid interest from the bank and when those companies might be looking a lot cheaper than they were," Francis said.
Rather than try to pick the bottom of the market – a fool's errand according to the experts -- eToro is trying to lower the entry point into the sharemarket, allowing Australians to invest little by little over the long-term.
"Australia is becoming a really important market for us, and given interest rates are going to be very low for a long time, and young people are looking for a way to grow their wealth and do things like save for a house deposit, they're going to be increasingly looking to shares to do that," Francis said.
For those who don't know where to start, Francis points out that eToro has largely made itself into a social trading platform, with users able to follow and even copy the investment strategy of others.
"We really encourage our clients to interact with each other, to talk about trading ideas, and we believe that at the end of the day, you know, a community that is educated, whether it be run by us or whether it be from other investors will be a better investing community," Francis said.
Just remember: even the best get it wrong sometimes.
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