Interactive Brokers® review 2023
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Interactive Brokers: Best for
- Active trading
- Tradable securities
- Margin rates
Interactive Brokers seems to make improvements year after year, and it’s the same this time around, too. New mobile apps, well-designed education pages and a podcast join traditional strengths such as a wide variety of tradable securities and low margin rates, making the broker among the very best. In addition to more user-friendly and accessible pages and apps, Interactive Brokers offers both a paid-trading tier as well as a no-commission tier, and mutual fund investors will find a whopping 19,000 funds without a transaction fee. The broker is making a huge effort to attract a broader clientele than the professional traders it’s traditionally courted, and it shows.
Other top-scoring brokers in Bankrate’s reviews include Charles Schwab and Fidelity Investments, both solid picks for virtually any investor. Those on the hunt for a broker with a focus on trading may want to compare Interactive Brokers to TradeStation, too.
Interactive Brokers: In the details
Pros: Where Interactive Brokers stands out
Trading commissions are one of the biggest draws for customers, and Interactive Brokers definitely trumpets its pricing structure, which favors truly high-volume traders, but it operates a no-commission tier, too. The broker runs two service tiers: Pro and Lite, which are the paid and free levels, respectively.
Stocks and ETFs: On its Pro platform, Interactive Brokers’ headline rate for stock and exchange-traded funds (ETFs) trades is $1, but customers should note that’s a minimum commission and you could run up higher costs. That’s because the broker’s pricing is based on a per-share cost of a half-penny per share. If you trade more than 200 shares, you’ll start to move above that $1 headline rate. Still, a $1 trade can be a good deal if you’re getting a better overall price for your shares with Interactive Brokers’ execution. High-volume active traders will have to evaluate whether the broker’s execution is worth the extra cost. Plus, traders on the Pro platform can receive $0 commissions on more than 150 no-transaction-fee ETFs.
If you’re running mammoth-sized trades (think 300,000 shares and up each month), then you’ll benefit from the broker’s tiered pricing, where commissions reach less than 10 percent of the half-penny rate. It’s another way that Interactive Brokers tries to attract active and professional traders.
But investors with a bit less coin can receive unlimited free stock and ETF trades if they’re part of the company’s Lite program. Plus, you’ll still enjoy many of the features of the flagship program.
No-transaction-fee mutual funds: Interactive Brokers bests all the top players in the number of no-transaction-fee mutual funds on offer. The broker offers more than 19,000 such mutual funds, both domestic and foreign, and these reduced fees are great for beginning investors.
Cryptocurrency: Interactive Brokers charges a commission of 0.12 to 0.18 percent, depending on monthly trade volume, with a $1.75 minimum commission. It charges no spread markups, unlike other brokers who tout commission-free crypto trading. So, for example, a basic $1,000 trade in a month would cost $1.80 and you’ll avoid paying markup fees that are hidden in the trading prices.
Interactive Brokers’ reputation in low-cost margin loans precedes it. It’s one of the best features of the broker’s Pro program and really stands out from others, and it makes Interactive especially popular with advanced traders. For margin balances below $100,000, the broker charges just 1.5 percent above the benchmark rate, and the rates only go lower as you borrow more. In some cases, Interactive Brokers is charging less than half of what competitors are, so investors using margin often should absolutely examine this broker closely.
However, if you’re using the Lite program, you won’t enjoy rates that are quite so cheap. Here rates start at 2.5 percent above the benchmark rate. That’s still much better than comparable brokerages, however, and if you don’t use margin, then it’s not a deal-breaker anyway.
Such cheap margin may allow some clever investors to use their Interactive Brokers account as a way to fund larger purchases tremendously cheaply, but the margin rate is variable and if overall rates rise, so will the costs of your loan.
Interactive Brokers upped its trading platforms in 2022, expanding them meaningfully. Trader Workstation remains the broker’s flagship desktop trading platform, and it’s among the best in the industry. Now available is GlobalTrader, a new mobile app that lets you access more than 90 global markets, and IMPACT, a mobile app that lets you make ESG investments more efficiently and sort those that align with your values.
Back to the workhorse, though. Trader Workstation is not a platform for investors who have never used one before. It’s a complex, fully-featured program that feels like it does just about everything. You’ll get real-time monitoring, market data, customizable charts, streaming news and plenty more. The platform also includes tools for risk management, such as option analytics, so you can see how price changes affect options values. You’ll have access to more than 100 global markets all from your desktop, and you’ll be able to trade virtually anything.
If that’s too much, you can downshift to the basic client portal, a platform that will get the trading job done with its practical and no-frills interface. Or go mobile with its high-powered apps.
If you’re into socially responsible investing, then Interactive Brokers has what it says is a first for the industry: a detailed scoring system for ESG (environmental, social and governance) factors. The system scores companies along granular areas, such as reducing emissions or engaging with human rights or their workforce, and then totals a score for each ESG category and overall.
You’ll be able to quickly scan for companies that score highly and then compare them against one another with easy-to-use graphical representations. For those looking to evaluate their investments on these dimensions, this schema brings a usable way to put it into practice.
Looking to put ESG investing into practice? The broker offers its IMPACT mobile app that allows you to look at your holdings from an ESG perspective and trade in or out, among other features.
Variety of investing choices
If it trades on a public exchange, it feels like it’s available to trade on Interactive Brokers. Of course, the broker offers the usual candidates – stocks, bonds, ETFs, mutual funds and options – but it goes even further. Traders can also find futures and metals (gold and silver) here, and can trade stocks on foreign exchanges as well. You’re going to feel like you can trade it all at Interactive Brokers.
In addition, working with Paxos Trust Company, the broker offers cryptocurrency trading, not something you’ll find at every brokerage rival. You’ll be able to trade Bitcoin, Bitcoin Cash, Ethereum and Litecoin at an attractive commission and, again, without those hidden markups.
Besides these traditional choices, Interactive Brokers introduced in 2022 what it calls event trading, which is binary options betting on whether specific events occur in a set time frame. Essentially, you bet on how a futures contract on the Chicago Mercantile Exchange will perform by the end of the day on a “yes-no” question, such as “Will Security X close above $10?”. The broker charges a flat $0.10 per contract fee for event trading.
Account management interface
Dealing with all the stuff surrounding actual trading can be a pain if the account management portion of a broker’s site is poorly laid out. Who wants to go hunting for tax forms? In years past we docked Interactive Brokers for its clunky account management page. It was disorganized, unintuitive and slow. That’s no longer the case, and it’s made serious strides.
Interactive Brokers has cleaned up its account management site, which you have to log into separately from the main trading platform, though you can still trade here. It has a clean dashboard layout — with account balances, top positions, clearer menus, and one-click links to “high-frequency” parts of the site, such as downloadable activity reports, tax forms, funds transfer and the like. Plus, a trade button allows you to launch an order ticket quickly.
It’s a welcome change from the prior layout and may now be the easiest-to-use account site among the major online brokers.
Research and education
Interactive Brokers has made great efforts recently to improve the education on its site. While the broker has been historically good about catering to advanced investors, it was less focused on beginners. Now, it’s shifted some of that emphasis and includes content that’s more relevant for a newer crowd, though overall it’s more focused on trading than long-term investing. In addition, the much better content organization has made the product much more accessible.
Another notable improvement: the broker has made it clearer for readers how to navigate its educational content such as its Trader’s Academy, which offers tons of articles on investing, economics, using the broker’s tools and so much more. Courses are thematically divided, and you can also separate them out by skill level, with beginner, intermediate and advanced tiers. It also features a clear place to begin, making this some of the clearest broker content out there.
As before, active traders will likely find the offerings very useful, especially as they expand their circle of competence. The broker offers webinars as well as courses on specific markets and its own trading tools. It also offers fundamental analysis and market commentary from nearly 100 pros, including access to free research resources as well as paid research services, all of which may appeal to both new and advanced investors. Tack on a podcast, too.
It’s worth reiterating: Interactive Brokers has made much progress in its educational offerings, meaning what was a slight negative in prior reviews should now be seen as a solid positive.
Cons: Where Interactive Brokers could improve
Limited retirement account types
If you’re looking for a few of the more specialized retirement account types, Interactive Brokers may not be for you. Of course, the broker offers the big retirement account types – traditional IRA, Roth IRA, rollover IRA and SEP IRA – but it’s lacking a couple of others that have grown popular in recent years, including the SIMPLE IRA (which is organized through a business) and the solo 401(k), which is arguably a better alternative to the SEP IRA.
Interactive Brokers offers so many other account types, including the other key retirement accounts, that these missing types are not a dealbreaker for most people.
No fractional dividend reinvestment
Interactive Brokers has the dubious distinction of being the only major online broker that lets you buy fractional shares but doesn’t allow you to reinvest your dividend that way. So it’s better than brokers allowing only reinvestment, but not quite as good as those doing both — a small point.
That said, the Interactive Brokers fractional purchase program is more robust than rivals, allowing you to buy partial shares in a simply huge number of stocks and funds, including U.S., Canadian and European stocks and ETFs — more than 10,000 in total! Tops by our count.
Middle-of-the-road options pricing
Interactive Brokers just hits the industry standard options pricing of $0.65 per contract. Not bad, surely, but other brokers offer better non-discounted pricing with no or little volume (not counting the free apps). For example, Ally Invest charges just $0.50 per contract, while E-Trade charges $0.50 a contract if you make 30 trades per quarter, not exactly high volume.
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