Does DEGIRO offer "free" ETFs? Discover all the associated costs
Until April 2023, DEGIRO offered a list of ETFs called the "Popular ETF Selection," where buying and selling these ETFs could be done without any transaction fees. Although this list remains available as of the date of this article, the ETFs included have undergone changes and are now subject to a €1 handling fee, according to DEGIRO's official pricing.
In other words, while they remain "free" in terms of DEGIRO's commission, the new €1 fee applied by an external entity effectively makes this investment a paid service.
In this article, we will analyze DEGIRO's "Popular ETF Selection" in detail, the associated costs, and whether it is still worth investing in this option.
What is DEGIRO's "Popular ETF Selection"?
DEGIRO offers a list called the "Popular ETF Selection," which includes various ETFs that can be bought or sold under special conditions. This program was designed to attract investors looking to minimize costs, especially those who prefer to invest in ETFs regularly.
Which ETFs are included in this list?
The full list of ETFs in the popular selection can be found in this link. Some of the highlighted ETFs are the following:
Costs associated with DEGIRO's "Popular ETF Selection"
Although the ETFs in this list offer advantageous conditions, there are additional costs that should not be ignored. Let’s analyze the main ones:
1. Handling fee
A €1 handling fee is applied to each transaction of ETFs from the "Popular ETF Selection." This fee is lower than the standard transaction fees for other products on the platform but eliminates the concept of "free."
According to DEGIRO, “this fixed fee covers all costs incurred related to the execution of your order (e.g., clearing and settlement expenses, brokerage fees, confirmation contract fees, regulatory fees, and execution fees).”
2. Connectivity fee
DEGIRO applies an annual connectivity fee of €2.50 per stock exchange where the investor executes trades. If you choose to invest in an ETF listed on multiple exchanges, such as the Amsterdam or London stock exchanges, this cost will be added to your total annual expenses.
3. External product costs
In addition to the fees charged by DEGIRO, there are costs imposed by the ETF issuers themselves, such as the Total Expense Ratio (TER)—the annual cost of managing an ETF, which varies by fund.
For example, the iShares Core MSCI World UCITS ETF (IWDA) has a TER of 0.20%. In other words, an investment of €100 in IWDA would incur an annual cost of €0.20.
It is important to note that this is an implicit cost. For instance, if IWDA delivers a 5% return in a year, this means its gross return before fees was approximately 5.20%.
4. Spread costs
The spread refers to the difference between the buy price (bid) and the sell price (ask) of an asset. In highly traded ETFs like IWDA, the spread tends to be small, but it remains an implicit cost for the investor.
- The "buy" price is what someone is willing to pay for the ETF (your selling price).
- The "sell" price is the price at which the ETF would be sold to you (your buying price).
For example, in an image where the buy price is €108,305 and the sell price is €108.32, the €0.015 difference is the spread.
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How is the handling fee applied?
DEGIRO applies what it calls a "Fair Use Policy" for order execution.
- Each calendar month, the first trade executed on an ETF from the Popular ETF Selection does not include DEGIRO’s trading commission, regardless of trade size or direction, as long as it does not result in a short position.
- However, a €1 handling fee still applies.
- Additional costs, such as currency conversion fees and spreads, may still apply.
Subsequent trades on the same instrument within the same calendar month also do not include DEGIRO’s commission or third-party costs, as long as:
- The transaction is in the same direction (i.e., buy or sell) as the first trade made that month on that instrument.
- The transaction value is at least €1,000.
Once a trade in the opposite direction or a trade below €1,000 is executed on the same instrument within the same month, the rule no longer applies to any further transactions, and standard commissions are applied:
- €2 DEGIRO commission + €1 handling fee per transaction.
Practical example: Buying the IWDA ETF
To illustrate the costs of investing in an ETF from the Popular ETF Selection, let’s consider buying iShares Core MSCI World UCITS ETF (IWDA), listed on the Amsterdam Stock Exchange.
Scenario: Buying 10 units of IWDA
- Price per unit: €100 (simplified for this example)
- Handling fee: €1
- Connectivity fee: €2.50 (if this is the only transaction on the Amsterdam Stock Exchange that year)
- TER: 0.20% annually on the invested amount (€1,000 x 0.20% = €2 per year)
Calculation:
- Initial investment: €1,000 (10 units x €100)
- Initial costs: €1 (handling fee) + €2.50 (connectivity fee)
- Recurring costs: €2/year (TER), plus potential spread costs when buying/selling
Total annual cost: €1 + €2.50 + €2 = €5.50
This calculation assumes that the ETF price does not change over the year (important for understanding the impact of the TER). This example highlights that, while the costs are relatively low, they are not zero.
Conclusion
DEGIRO still offers attractive conditions for investors interested in ETFs, especially for those who trade frequently or invest in the Popular ETF Selection.
However, ETFs are no longer completely "free" as they were before April 2023, due to the introduction of the €1 handling fee per transaction.
Additionally, other costs—such as the connectivity fee, TER, and spreads—can accumulate over time, reducing the investor’s net returns. Therefore, it is essential to assess all associated costs before making investment decisions.
Despite these changes, investing in ETFs through DEGIRO can still be a cost-effective option, especially for those looking for simplicity and competitive fees. The key is to fully understand the pricing structure and how it impacts your financial goals.
