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I am wondering on what exactly you buy when you buy fractional shares on eToro:

  • The actual asset, i.e. the stock/share?
    • You get dividends if the company pays any.
    • It would still be yours if eToro went broke.
  • A CFD (contract for difference), i.e. a contract between you and eToro
    • You might not be paid anything back if eToro went broke.

eToro has contradicting information on the issue:

From https://www.etoro.com/trading/markets:

With CFDs, you can open SELL (short) positions, use leverage, and buy fractional shares.

From https://www.etoro.com/investing/guides/fintech/understanding-cfd:

CFD trading, which enables fractional shares,

From https://www.etoro.com/customer-service/help/1281273772/what-do-i-purchase-when-i-buy-stocks-on-etoro:

Buying a stock on eToro by opening a “buy” (long), non-leveraged position means you are investing in the underlying asset* (real stocks), and the stock is purchased and held in your name. This also applies to fractional shares: for example, on eToro, you can invest as little as $50 to purchase part of a share whose price per unit is $1,000.

The * notes some exceptions which generelly do not apply to my location.

Inside the eToro trading platform, when buying fractional shares it says I am buying the underlying asset.

I have contacted eToro's customer support, mentioning the contradiction, but they have answered with both pieces of contradicting information.

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    I was going to research this myself out of curiosity and respond back with an answer. However after now going over numerous documents, I've encountered a number of contradictions myself. (i.e. FAQ: "Would I own shares on eToro"? "Yes...". Then, different page, there's a huge list of exchanges upon which it's stated you're automatically trading CFDs). To conclude, I can't provide an answer, but I now share your pain. I think if you're long on LSE stocks, unleveraged, then the security's in your name. I also gather CFD is written next to CFD positions. Beyond that... not so sure. Be careful!
    – Rab
    Commented May 14, 2020 at 23:31

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After asking again, the customer servive has finally given me a more appropriate answer. On the question whether you buy (partial) shares or a CFD, they have referred to the information shown with the trade. Whenever I have been about to buy anything without leverage (X1), this information has always told me I am about to buy the underlying asset (not sure what the exact wording is in English). When short-selling or buying with leverage (X2, X5 etc.) it has always told me I am about to buy a CFD. Of course, this is what you would expect from a platform that does not scam you.

I conclude that you can rely on the information displayed along the trade and that in case of stocks the wording "underlying asset" and "real shares" (or similar) indicates purchase of real shares, no matter if fractional or not. So it seems that some of the "help" documents out there just have wrong or outdated information.

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  • Hi Marko, I know it has been a while but thanks for the information. So buying fractional shares does not count as CFD? Also how are you going with etoro? How would you rate it? Commented Dec 6, 2021 at 15:37
  • "Fractional shares vs. whole shares" and "underlying asset vs. CFD" are orthogonal (independent) topics. E.g., you can buy a real fractional share or a CFD of a fractional share, and you can buy a real whole share or a CFD of a whole share. Commented Dec 6, 2021 at 19:15
  • I rate eToro 2/5. I still use it because of its broad range of assets and its suitability for users on a small budget, but it is not awesome at all. See my thorough review at Truspilot: trustpilot.com/reviews/601198e2679d9705c85b7101 Commented Dec 6, 2021 at 19:33

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