Interactive Brokers 2021 Review: Pros, Cons and Comparison

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Interactive Brokers has long been a popular broker for advanced traders, but in 2019 the company launched a second level of service – IBKR Lite – for more casual investors.

With IBKR Lite you get unlimited free trades in stocks and exchange traded funds listed on the US stock exchanges. If you want to trade other investments, including options, futures, mutual funds, fixed income and more, you can do so on 135 exchanges in 33 countries with a Lite account, but trading costs will be the same as IBKR Pro. investors pay.

As the name suggests, IBKR Pro is aimed at advanced traders. If that’s you, you’ll probably like the broker’s price per share of $ 0.005 per share (minimum is $ 1), an advanced trading platform, an unrivaled range of marketable securities – including foreign stocks – and ridiculously low profit margins.

Both levels of service have a minimum account of $ 0 and offer fractional shares. IBKR Lite has no account maintenance or inactivity fees. IBKR Pro charges an inactivity fee, although this can be avoided if you trade relatively frequently.

Interactive Brokers is best for:

  • Occasional and advanced traders.

Interactive Brokers at a Glance

• IBKR Lite: unlimited free transactions on stocks and ETFs listed in the United States.

• IBKR Pro: $ 0.005 per share; a minimum of $ 1 and a maximum of 1% of the commercial value; volume discount available.

IBKR Lite and IBKR Pro: no base commission; 65 cents per contract with a minimum of $ 1. Volume discount available.

Account fees (annual, transfer, closing, inactivity)

• IBKR Pro: accounts with less than $ 100,000 pay $ 10 / month less trade commissions; accounts under $ 2,000 pay $ 20 / month less commissions.

Number of ETFs without commission

• IBKR Lite: unlimited trades without commission on all available ETFs.

• IBKR Pro: 96 ETF without commission.

Number of mutual funds without transaction fees

Over 8,300 mutual funds with no transaction fees.

IBKR Lite and IBKR Pro clients have access to the Client Portal trading platform and the powerful Trader Workstation platform.

Advanced features mimic the desktop app.

Extensive research offerings, both free and subscription-based.

Customer support options (includes website transparency)

24 hour phone, email and chat support available six days a week.

Where Interactive Brokers shines

Low commissions: If you are a casual investor, it’s hard to beat the free trades you will enjoy with IBKR Lite. But even advanced traders who opt for IBKR Pro will appreciate Interactive Brokers’ low equity and ETF commission structure, which favors frequent, high volume traders at just $ 0.005 per share. There is a minimum trade commission of $ 1 and a maximum of 1% of the total trade value, and trading and regulatory fees are included.

The broker also offers tiered rates to further reduce rates. Investors who trade up to 300,000 shares per month can pay $ 0.0035 per share; Laddered rates based on trading volume go as low as $ 0.0005 per share for clients who trade over 100 million shares per month. Exchange and regulatory fees are in addition to this plan.

Option tradingis also competitively priced, for Pro and Lite customers, with a charge of 65 cents per contract and without a base, as well as discounts for larger volumes. The minimum option trading commission is $ 1 per order.

Margin rate: Margin traders will also benefit from the low rates of Interactive Brokers. For IBKR Pro customers, the maximum margin rate is the benchmark rate plus 1.5% – and NerdWallet users get an additional 0.25 percentage point discount. For IBKR Lite, this is the reference rate plus 2.5%. These rates apply to balances up to $ 100,000; rates drop to higher balances. The broker charges a blended rate based on the size of the margin loan and has a calculator on their website to help investors quickly do the math based on their balance.

Interactive Brokers also offers an integrated cash management feature, which allows investors to borrow from their account with a Mastercard debit card, also at low interest rates.

Fractional shares: The ability to buy a portion of a company’s stock, rather than a high-priced stock, makes it easier to invest in companies with high stock prices. This in turn makes it easier to maintain a diversified portfolio, especially for investors with smaller accounts. For example, rather than paying more than $ 575 for a Tesla stock, you can split that money between different companies.

Exchange platform: Casual traders who find IBKR Lite appealing will find the right client portal platform for their trading needs. But IBKR Lite and IBKR Pro traders looking for something more powerful can now access Interactive Brokers’ Desktop Trader Workstation, which is considered one of the best trading platforms available for advanced traders.

The platform is fast and includes standard features like real-time monitoring, alerts, watchlists, and a customizable account dashboard. An Options Strategy Lab allows you to create and submit simple and complex multiple option orders and compare up to five option strategies at a time.

Other tools include a volatility lab, advanced charts, heat maps of industry performance and ticker symbols, paper trading, and a mutual fund replicator, which helps users identify which ETFs are replicating. the performance of a selected mutual fund but offer lower fees. InteractiveBroker’s For You notifications provide personalized alerts on events that may affect a trader’s investments.

Note: another broker we are looking at, Zacks trade, offers its customers access to white label versions of Trader Workstation. Zacks Trade charges higher trading commissions, but offers customers free calls with support representatives, who are licensed brokers. This is an option to consider for traders who want the power of Interactive Brokers’ trading platforms and a little more personal support.

Socially responsible investment: For investors wishing to trade with conscience, Interactive Brokers recently unveiled their Impact Dashboard, free to all users on Trader Workstation, the client portal or mobile applications. The dashboard allows investors to select their personal investment criteria from among 13 principles (including air and water quality, LGBTQ inclusion and gender equality). Investors can also exclude investments based on 10 categories, such as animal testing, political spending and corporate lobbying, and the generation of hazardous waste.

Mobile app: The IBKR mobile app, available to Lite and Pro customers, is Trader Workstation on the go, with advanced trading shortcuts, over 400 columns of data, exercise and option broadcast templates, news, searches, charts and scanners. Users can create order presets, which pre-populate order tickets for quick entry. Presets configured on Trader Workstation are also available from the mobile app.

Research: Interactive Brokers provides access to a wide selection of research and news service providers, most of which are free, including Fundamentals Explorer, which features Thomson Reuters fundamental data on over 30,000 companies, as well as over 5,500 ratings. analysts and reports and newswires from 82 companies. Other research providers available to all clients include Zacks Investment Research, Morningstar Equity Ownership, Market Realist, 24/7 Wall Street, and Seeking Alpha. Over 100 additional providers are also available by subscription.

Investment selection: Interactive Brokers has something for everyone here: Advanced traders will love the wide selection of products, from standard equity, options and ETF offerings to precious metals, forex, warrants and futures. All retired investors will be pleased with the broker’s impressive list of no-transaction-fee mutual funds – over 8,300 in all – and the respectable selection of 96 commission-free ETFs (and Lite clients can trade all of them). fees for ETFs listed in the US. free).

Interactive Brokers also offers a robo-advisor offer, Interactive Advisors, which charges management fees ranging from 0.08% to 1.5%. The service offers around 80 wallet options, and 36 of those wallets only require $ 100 to get started. (Management fees and minimum accounts vary by portfolio.)

Open to international investors: While many brokers are only open to US investors, Interactive Brokers is available to investors in 218 countries and territories. As stated above, Interactive brokers opens the door for investment on 135 exchanges in 33 countries and allows clients to fund and trade accounts in 23 currencies.

Where Interactive Brokers Fails

The shortcomings of Interactive Brokers are mainly due to the company’s focus on advanced traders:

Inactivity Fee: Interactive Brokers is aimed at active traders, and this goal is manifested in its inactivity fees for IBKR Pro clients. Accounts with a balance of $ 100,000 or less must meet a minimum of $ 10 per month in trading commissions, or Interactive Brokers will charge the difference as a monthly fee. Accounts with an equity balance of $ 2,000 or less must meet minimum trade commissions of $ 20. IBKR Lite does not charge an inactivity fee.

There is a break here for customers 25 and under, who have a minimum monthly trade commission of just $ 3.

Ease of use of the website: Interactive Brokers provides a lot of information on their website, but finding and interpreting the information you want is not always easy. For IBKR Pro customers, the different commission and fee structures can make it difficult to identify your costs quickly. Parts of the website are dedicated to institutional, brokerage and proprietary trading accounts which can be confusing.

Is Interactive Brokers Right For You?

Interactive Brokers has always been a great choice for active traders, especially those who can switch to the broker’s cheaper volume pricing setup. Now, with the availability of free trades with IBKR Lite, even casual traders might find Interactive Brokers a serious competitor. But newbie investors might prefer a broker that offers a bit more manual and educational resources.

Arielle O’Shea contributed to this review.

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