After writing about why trading isn't investing, you might be thinking: fine, I can't read a chart to save my life, but what if I just copy someone who can?
That's exactly the pitch behind copy trading. And yes, I gave that a go too.
So what is copy trading?
The idea is simple. You pick a trader on a platform, allocate some money to them, and from then on your account automatically mirrors whatever they do. If they put 5% of their portfolio into Nvidia, you put 5% of what you allocated into Nvidia. They sell, you sell. You don't lift a finger.
eToro is probably the best-known platform for this (the feature is called CopyTrader), and it's the one I used.
If you don't know the platform, here's what eToro is, what it costs and its risks.
On paper it sounds great. Someone "professional" is managing your money, you can see their track record over the past few years, their risk score, how many people copy them... It's almost like picking an investment fund, except the fund has a face and a username.
My experience: $500 to test the waters
I didn't go all in. I put in $500 to see how it worked, and once things looked good I started adding money every month. Basically the same thing I do with my index funds, just pointed at a person instead of an index.
To choose who to copy I looked at the usual stuff: returns over several years (not just the last one), a reasonable risk score, someone who wasn't placing a hundred trades a day, and a portfolio that actually made sense when you looked inside it.
The result? I made money. I'm not going to pretend otherwise just to make this post more dramatic.
But the fact that it worked out doesn't mean it was a good idea. I'd already learned that one with trading, and it applies here just the same.
The problem: all your eggs in one basket
When you buy an MSCI World index fund, you're getting a tiny slice of around 1,400 companies across 23 developed countries. If one of them tanks, you barely notice.
When you copy a trader, you're betting on one person. Their judgement, their mood, their hot streak. If one month they decide to throw half the portfolio into a stock they've got a good feeling about, so do you. If they're wrong, you're wrong with them. If they get bored, switch strategy or quit the platform, your money follows.
It's fake diversification: they might hold 20 stocks, but every single one went through the same brain.
And there's a bias that's easy to miss: the traders at the top of the leaderboard are the ones who have had good years. Nobody shows you the hundreds who did just as well… right up until they didn't. Past performance, you know how the rest of that sentence goes.
Stuff the ads don't mention
A few things worth knowing before you copy anyone:
- eToro doesn't charge extra for copying, but the trades still cost money. You pay what you'd pay if you placed them yourself: spreads, overnight fees on CFDs or leveraged positions, currency conversion if your money isn't in dollars... The more your trader trades, the more it costs you.
- The trader gets paid for having you. eToro runs a "Popular Investor" programme that pays traders based on how much money people copy them with. Nothing wrong with that in itself, but be aware they have an incentive to attract you.
- There's a minimum per copy (on eToro it's usually $200), so copying several people to diversify takes more money than you'd think.
- Taxes get messy. Every time the trader closes a position at a profit, you've got a gain to report, and a busy trader can mean dozens of them a year. How it's taxed depends entirely on where you live, so check your own country's rules before you start.
- You can set a stop loss on the copy. Use it. It's your way of saying "if I lose more than X, stop everything".
So, would I recommend it?
For the core of your money, no. That's where I still think boring wins: automatic monthly contributions into index funds, low fees, and letting compound interest do its thing for decades. If you want to see how much a high fee eats over 30 years, have a look at the fund fees calculator. It's a bit scary.
As an experiment with a small amount you can afford to lose? Sure. That's how I did it: a bit to test, and contributions that didn't keep me up at night. You learn how someone more experienced trades, you get to see a portfolio from the inside, and you understand the risk you're taking much better.
What I'd never do is put my house deposit savings in there because someone posted +40% last year. Copying someone doesn't remove the risk. It just removes your control.
If you still want to try it with a small slice, you can sign up for eToro with my link (it's a referral link: I get a small reward and it costs you nothing extra). Start without leverage and put a stop loss on the copy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. A significant share of retail investor accounts lose money when trading CFDs. Past performance is not an indication of future results. This is not financial advice.