How to Buy ETFS in the EU

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If you’re new to the world of investing finding your way to buying your first Exchange-Traded Funds (ETFs) may seem a bit daunting. But fear not, we’re here to show you how to kickstart your journey! In just a few clear steps, you can embark on your ETF investment journey, diversifying your portfolio and potentially enhancing your financial future. Let’s demystify the process and guide you through the steps to begin investing in ETFs with confidence.

1. Choose an ETF Broker: Your Gateway to ETF Investments

To begin your journey into the world of Exchange-Traded Funds (ETFs), the first step is to select a reliable ETF broker. 

What Is an ETF Broker? An ETF broker simplifies the process of purchasing ETFs by providing user-friendly interfaces that connect with ETF exchanges on your behalf. These platforms aim to streamline the investment experience, offering straightforward options for buying and managing your ETF portfolio. While some ETF brokers may charge slightly higher fees compared to exchanges, they make the investment process more accessible, especially for those new to the world of ETFs.

Notable EU ETF Brokers:

  1. DEGIRO: Recognized for its low fees and intuitive platform, DEGIRO stands out as an excellent choice for ETF investors in the EU. The platform provides a range of ETF options, making it suitable for investors with varying preferences.

  2. Trade Republic: Tailored for simplicity, Trade Republic offers a mobile-first approach, making it easy for users to invest in ETFs on the go. The platform’s user-friendly interface appeals to both beginners and experienced investors.

  3. Trading 212: With a commitment to a commission-free model for various investments, Trading 212 is gaining popularity among EU investors. The platform’s educational resources contribute to making informed investment decisions.

Choosing a reputable ETF broker like DEGIRO, Trade Republic, or Trading 212 ensures that you can navigate the ETF market with ease. In the subsequent steps, we’ll guide you through the process of opening your account, verifying your identity, and purchasing your first ETF!

2. Open Your Brokerage Account and Verify Your Identity

Embarking on your ETF investment journey is a seamless process with brokers like DEGIRO, Trade Republic, and Trading 212, as setting up your brokerage account is a hassle-free experience. Unlike traditional methods involving paperwork, these platforms allow you to initiate the process directly from your mobile app or online. You can roughly expect the following steps:

  1. Account Registration: Visit the brokerage’s website and locate the “Sign-Up” or “Open an Account” option. Provide the necessary information, including your name, contact details, and email address.

  2. Verification Process: As part of the verification process, you may be required to submit identification documents. This is a crucial step to prevent fraud and adhere to regulatory requirements. The platform might ask for a copy of your driver’s license or passport. Make sure the uploaded documents are legible and match the information provided during account registration.

  3. Selfie Verification: Some brokerages may implement a selfie verification step. You might be asked to take a selfie to ensure that your appearance matches the identification documents you submitted. Follow the platform’s guidelines for taking and uploading the selfie.

  4. Wait for Approval: After submitting the required documents, wait for the brokerage to review and approve your account. The duration of this process can vary, but it’s a necessary step to ensure the security of your account.

  5. Access Your Account: Once your account is verified and approved, you’ll receive confirmation. Log in to your brokerage account and explore the platform’s features.

While there may seem to be a lot of steps I can assure you that the entire process may only take up about 15 to 20 minutes most of the time. 
 

3. Deposit cash on your brokerage account

Now that you’ve chosen your ETF broker and set up your account, the next step is to fund it. Depositing cash into your brokerage account is typically a straightforward process, often involving the connection of your bank account to your brokerage platform. This financial integration allows you to seamlessly transfer funds, ensuring you have the capital ready for your ETF investments.
 
Different platforms may offer various methods for depositing cash, ranging from bank transfers to electronic payment systems. Please be aware of any costs associated with certain methods of cash transfers at your brokerage of choice and choose your method of depositing cash accordingly.
 

4. Choosing the right ETF

Now that you have deposited funds into your brokerage account it is time to pick the right ETF. Prominent investment firms such as Vanguard and iShares offer a wide number of ETFs, each designed to cater to specific preferences.
 
If you want global exposure, Vanguard’s Total World Stock ETF or iShares MSCI ACWI ETF present comprehensive solutions. If you are looking to buy into the US market, the Vanguard S&P 500 ETF, tracking the renowned S&P 500 index, is a good choice. For the European marker the iShares Core MSCI Europe ETF is a possibility. Additionally, you can also target a specific industry sector, offerings like Vanguard Information Technology ETF or iShares U.S. Healthcare ETF provide opportunities in this regard.
 
Further there are factors such as expense ratios, liquidity, and historical performance that may influence your decision. For a more comprehensive read on what ETF to choose please read this article on FrogMarketIndex.
 
As a beginner investor we suggest buying into an all world or S&P 500 index. We think these provide sufficient spread and overall provide good returns over time. Further we recommend the Dollar Cost Averaging strategy to buy into the market. Buy one stock or ETF each time to minimize potential costs related to buying at your brokerage of choice.
 

5. Sit back and relax

The beauty of investing in ETF’s is that its a long term strategy. Unlike highly speculative assets like cryptocurrencies or options ETF’s aren’t going to make you rich over night, but they aren’t going to bankrupt you either. The S&P 500 index has returned a historic annualized average return of around 10.26% since its 1957 start through the end of 2023. This is one of the reasons that investing in indexes through ETF’s is seen as a great long term investing strategy which may be anticipated to give you great returns over time.

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