Interactive Brokers Review
In this review, we’re going to talk about the following:
- What is Interactive Brokers?
- Who is Interactive Brokers for?
- What Features does the Interactive Brokers platform offer?
- Why did Wall Street Survivor choose Interactive Brokers as their NUMBER ONE broker for international investors?
- How do I get access to Interactive Brokers’ FREE MEMBERSHIP and earn interest on my uninvested cash?
- What sustainable investing options does Interactive Brokers offer?
For the year 2022, Barron’s ranked Interactive Brokers as the number one overall online brokerage for the fifth consecutive year, a first in Barron’s history. Not only that, Barron’s also ranked Interactive Brokers number one for information and as the number one online brokerage for active traders.
So let’s dive into our Interactive Brokers Review and talk about why Interactive Brokers is such a heavily-awarded online broker.
What Is Interactive Brokers?
Interactive Brokers LLC (NASDAQ: IBKR) is a brokerage founded in 1977 by Thomas Peterffy, who is the current Chairman of the Board. It is headquartered in Greenwich, Connecticut, and has over 2,100 employees in 15 countries.
The company places almost 2 million trades a day and brokerage account holders have over $200 billion in customer equity.
Interactive Brokers’ mission is to “create technology to provide liquidity on better terms. Compete on price, speed, size, diversity of global products and advanced trading tools.”
And they have more than succeeded in carrying out that mission.
By connecting you to so many stock exchanges in so many different countries while offering some of the fastest and best-priced technology out there, Interactive Brokers certainly lives up to its promises and competes with the best online brokers out there.
Who Is Interactive Brokers For?
Interactive Brokers is a great platform for advanced investors who want access to a wide array of securities and asset classes, including international investments.
In fact, Interactive Brokers offers access to 150 exchanges in 33 countries around the world. Global investors gain access to international equities as well as foreign corporate and government bonds.
IBKR clients can trade stocks long and short, penny stocks, mutual funds, bonds, options, forex, and even fractional shares.
Fortunately for investors, as of September 13th, 2021, Interactive Brokers now offers access Bitcoin, Ethereum, Litecoin, and Bitcoin Cash through Paxos Trust Company. Clients can now trade cryptocurrencies with industry-low commissions of just 0.12% – 0.18% of trade value, depending on monthly volume, with a USD 1.75 minimum per order.
Investors located outside of the United States, unfortunately, do not have access to some of the best U.S.-based brokerages out there, so they need a brokerage that will accommodate them no matter where they are.
And that’s where Interactive Brokers comes in!
The company connects its customers to so many exchanges in so many countries that it’s virtually impossible to imagine recommending anyone else to international investors.
In fact, Investors from 200 countries & territories can access IBKR Pro pricing, regardless of trading frequency.
Interactive Brokers Review – The Trading Experience
Traders Workstation is the main screen from which IBKR users can access their portfolios and perform trades and research.
You can use the TWS to find the best stocks, bonds, mutual funds, and exchange-traded funds for you.
The TWS is an extremely advanced tool that offers access to live news, charting tools, screening tools, third-party research, and portfolio analysis.
While this tool is very powerful in the hands of an advanced investor, it is not meant for beginner investors or investors looking to employ a hands-off, buy-and hold strategy.
The TWS is quite complicated and can be confusing to those looking for a simple, easy-to-understand user interface. Professional traders, on the other hand, will find much value in using the TWS for day trading and swing trading.
Commissions on Interactive Brokers
IBKR Lite users get to enjoy a commission-free investing experience. But for those who want to enjoy the perks that the IBKR Pro system has to offer, they will face either a flat-rate or tiered commission system.
If you choose to utilize the flat-rate system, the fee is $0.005 (half a penny) per share traded. This fee has a minimum of $1, and maxes out at 1% of the trade value.
Once you start placing trades in large volumes, the tiered system becomes the better option.
If you trade under 300,000 shares per month, the fee will be $0.035 per share. As you trade more and more shares, the fee decreases, reaching a minimum of $0.0005 per share over 100,000,000 shares traded per month.
Keep in mind that, if you choose to use IBKR Lite in order to avoid commissions on U.S. equities, Interactive Brokers will accept payment for order flow for those trades.
This means that, rather than connecting you to the best market maker in order to maximize price improvement on your trades, IBKR will accept payment from market makers in exchange for routing your trades to them.
Payment for order flow is very common with brokerages and is not unique to Interactive Brokers, but it is worth noting that you can gain some of the best price improvement in the industry by using IBKR Pro, which utilizes an exceptional order routing system.
While IBKR Pro is a great platform for advanced investors, it has traditionally included increased fees.
However, effective July 1st, 2021, Interactive Brokers completely eliminated inactivity fees from its platform altogether!
Investors can now utilize IBKR Pro pricing and features without worrying about any underlying volume quotas whatsoever.
Want to learn more about the different services offered with IBKR Lite and IBKR Pro? Click here!
Margin Rates on Interactive Brokers
Still researching the best features of the Interactive Brokers platform? Look no further than its impressively low margin rates. According to Stockbrokers.com in 2022, IBKR offers rock-bottom margin rates. IBKR Lite users pay a margin rate of just the benchmark rate plus 2.5%, while IBKR Pro users enjoy a rate of benchmark plus 1.5%.
These rates apply for portfolio balances below $100,000 and decrease with larger portfolios.
ESG Investing on Interactive Brokers
For those investors who are interested in SRI, or Socially Responsible Investing, IBKR has beefed up its screening tools and introduced a new ESG grading system.
The Impact Dashboard is a tool that allows you to screen for 13 SRI categories that are considered positive , such as environmental sustainability and social justice.
You can also screen out negative categories such as guns and political campaign contributors.
After you’ve tailored your portfolio to fit your values, you can receive a grade from the Impact Dashboard that indicates how well your portfolio lines up with the values you’ve chosen.
If you are interested in ESG Investing on the go through a streamlined application, Interactive Brokers recently launched its Impact Mobile platform.
According to Will Peterffy, ESG Director at Interactive Brokers, “IMPACT takes the utility and values alignment offered by our Impact Dashboard and places it at the palm of the investor’s hand,”. “We’re leading a new generation of investors making values-based investments by enabling them to develop their own conscious investment plan based on their personal values providing accountability and transparency.
If ESG investing on the go wasn’t good enough, IBKR Impact includes a forest initiative. For every $1000 deposited, Impact will plant 25 trees. According to the press release, “IBKR customers who use the IMPACT app can easily help reforestation efforts and direct IMPACT to plant trees in environmentally critical regions such as California, Mexico, Côte D’Ivoire or India.”
Click here to learn more about the sustainable investing options offered by Interactive Brokers!
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INTERACTIVE BROKERS SUMMARY
What You Get:
- Taxable, Retirement, Trust, and Custodial Accounts
- Cash Management Feature with Debit Card
- Robo-Advising Service for Portfolio Perfection
The Interactive Brokers Difference:
- Access to 150 Exchanges in 33 Countries
- Perfect for Investors Based Outside of the U.S.
Interactive Brokers Pricing:
- IBKR Lite is completely FREE
- Commissions for IBKR Pro range from $0.35 to 1% of order value
While Interactive Brokers is currently best for day traders and advanced investors looking for global trading opportunities, IBKR has been putting substantial effort into implementing changes that can accommodate newcomers and hands-off investors.
For example, they have a robo-advisory service called Interactive Advisors that can analyze your risk tolerance and financial situation and invest your money for you. (If you’re unfamiliar with robo-advisors, check out Wall Street Survivor’s take on them here.)
Global Trader and Analyst Platforms
In a further attempt to reach newer investors, this year IBKR officially launched Global Trader, its new mobile trading application.
Within just a few minutes, users can directly access 80 stock exchanges in North America, Europe and Asia, while depositing in up to 23 unique currencies.
Interactive Brokers unique expertise in providing service to users in over 200 territories and countries is clearly demonstrated in the application’s global feel and reach.
In addition to the mobile application, IBKR also launched Global Analyst, a research tool solely designed to help investors find fantastic investing opportunities worldwide.
Global analyst is a fantastic source and scanner that helps investors to identify undervalued stocks that can be used hand in hand with the Global Trader application.
Interactive Advisors offers you access to plenty of pre-set portfolios that contain a mix of funds and individual securities.
In addition to Interactive Advisors, IBKR has also released and improved IBot, an artificial intelligence-powered chatbot that can direct you to different IBKR resources and help answer questions.
Some of the unique features offered by Interactive Brokers are the mutual fund replicator, tax optimizer tool, and stock loan programs.
Mutual Fund Marketplace and Bonds
With Interactive Brokers’ Mutual Fund Marketplace, residents from around the world get access to more than 45,000 mutual funds from 400+ fund families, over 17,000 of which do not have transaction fees.
The Mutual Fund Search tool helps you find the right funds for you using the criteria you choose.
The mutual fund replicator allows you to mimic popular mutual funds at a cheaper price by investing your money in ETFs or portfolios that are similar or identical to the mutual funds.
Furthermore, IBKR offers a vast universe of over 1 million bonds globally with no mark-up or built in spreads, including low, transparent commissions.
In fact, Benzinga has named Interactive Brokers its number pick for bonds, mutual funds, and a host of other financial products.
The client portal is your one-stop shop for everything portfolio related. You can see your pending trades, your account balances, and performance metrics.
Tax Optimizer Tool
The tax optimizer tool works wonders for your tax returns by harvesting losses and improving lot selection.
Stock Loan Program
If you choose to participate in a stock loan program, you offer your shares up to be borrowed by another investor so they can sell it short.
Once you receive your share back, Interactive Brokers splits the short sale commission with you 50/50.
IBKR Debit Mastercard
Interactive Brokers offers a Mastercard debit card that is integrated seamlessly with your Interactive Brokers account.
The cash management feature is included with your account, so you can use the IBKR Debit Mastercard to make purchases with the cash you already have sitting in your Interactive Brokers account.
You can also use the debit card to borrow money against your brokerage account.
Interactive Brokers advertises the interest rate for these loans at 1.59% or less, which is less than credit cards, personal loans, and home equity lines of credit.
There are no minimum monthly payments or late fees (like there are with credit cards) for borrowing with your IBKR Debit Mastercard, so you can pay the loan back whenever you’d like.
You can use your IBKR Debit Mastercard to withdraw up to $1000 per day from ATMs.
Earn Interest on Uninvested Cash
Interactive Brokers will also pay you interest on your uninvested cash.
If your account has a net asset value (NAV) of $100,000 or more, you will receive the maximum amount of interest offered.
If your account has an NAV less than $100,000 but more than $10,000, then you will earn interest proportional to the size of your account.
$20,000 would earn 20% of the maximum interest rate, $30,000 would earn 30% of the maximum interest rate, and so on.
Interest is compounded daily and posted to your account monthly.
You can calculate what the interest rate on your uninvested cash would be here.
Research and Education
IBKR’s research and education tools are some of the best in the business, and they are constantly improving.
Investors have access to screeners, charting tools, calculators, live news, third-party research, and even a trading idea generator.
While education hasn’t always been the company’s strong suit, it has put much effort into improving these resources to be more welcoming to newcomers.
Investors can learn about trading, take quizzes and tests to evaluate their knowledge, and even attend webinars to learn more.
The mobile app gives you easy access to everything you need on the Interactive Brokers platform.
You can even use the mobile app like your typical banking app to deposit checks right from your phone!
The mobile app uses multi-factor authentication for your account logins in order to keep your account safe and secure.
Before You Buy
While Interactive Brokers is typically very open and honest with its clients, it is worth noting that the broker-dealer got into some hot water with the SEC last year for failing to file Suspicious Activity Reports.
As mentioned above, Interactive Brokers is one of the absolute best platforms for professional traders and advanced investors who wish to get quick access to global markets and some of the best order routing technology in the game for international trading.
On top of that, IBKR is becoming an increasingly welcoming environment for new investors.
As the company continues to put emphasis on its AI assistance, educational resources, and free services, it may even come to rival the current online brokers that act as hubs for beginner investors!
That’s it for our Interactive Brokers Review – make sure to check them out using the link above!