Interactive Brokers® review 2022
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Interactive Brokers: Best for
- Active trading
- Low-cost trading
- Margin trading
Interactive Brokers has made long strides with its brokerage in recent years and jumps to a five-star ranking in 2022. The broker has long catered to active and professional traders, and it’s worked to improve its platforms and customer support to be more user-friendly and accessible. And those improvements go well with its high-power trading platform and stunningly low margin rates. Interactive Brokers’ core service tier offers free trades, or clients can step up to the broker’s vaunted trade execution on its pay tier (Pro). Investors can access an industry-leading selection of no-transaction-fee mutual funds, too. Interactive Brokers has increasingly made its outfit suited to newer investors – and it’s a great pick for those who are serious about investing.
Those looking for an all-around broker, especially with an emphasis on research and education, should also consider Charles Schwab and Fidelity Investments. Those looking for high-power tools may want to check out E-Trade and active traders should also evaluate TradeStation.
Interactive Brokers: In the details
*minimum, or $0.005 per share, but also cheaper with volume-based pricing
Top features you’ll love
This is Interactive Brokers’ flagship trading platform, and it’s among the best in the industry. This is not a platform for investors who have never used one before, however. 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 that 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 all a bit too much, traders can downshift to the basic client portal, a platform that will still get the trading job done with its highly practical and no-frills interface.
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.
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. The broker has eliminated its minimum monthly activity fee, which typically cost customers at least $10 a month if they didn’t ring up at least the same amount in commissions. So it’s even friendlier now for newer investors to get started here.
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. High-volume active traders will have to evaluate whether the broker’s execution is worth the extra cost.
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 as low as 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 now 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.
Options: Among the brokers who charge a commission for options trading, Interactive Brokers now stands in line with the pack, after much of the industry slashed their prices to the same $0.65 per contract level. Like most brokers today, Interactive does not charge a base commission but charges a per-contract fee. But here, too, the broker offers discount pricing, with rates as cheap as $0.15 per contract, if you trade more than 100,000 contracts a month.
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 7,700 such mutual funds, 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 would cost $1.80 and you’ll avoid paying 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 much 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 so if overall rates rise, so will the costs of your loan.
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) there, and are able to trade stocks on foreign exchanges as well. You’re going to feel like you can trade it all at Interactive Brokers.
In addition, the broker offers cryptocurrency trading, not something you’ll find at every rival. You’ll be able to trade Bitcoin, Bitcoin Cash, Ethereum and Litecoin at an attractive commission.
Interactive Brokers has the dubious distinction of being the only major online broker that allows you to buy fractional shares but doesn’t allow you to reinvest your dividend in partial shares. So it’s better than brokers allowing only reinvestment, but not quite as good as those doing both — a small point. But the Interactive Brokers program is more robust, allowing you to buy partial shares in a simply huge number of stocks and funds — more than 10,000! Tops by our count.
To buy a fractional share you’ll need to buy at least $1 or one-ten-thousandth of a share (if you’re buying by shares), and the program works whether you’re in the Pro or Lite service tier. It’s a solid feature that gets smaller investors into those high-dollar stocks more easily.
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, unlike the rest of the industry). Now 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.
Cons: Where Interactive Brokers could improve
Education for new investors
If you’re a new investor looking for educational components in your broker, then Interactive Brokers might not be for you. The broker does provide some basic lessons, including ones on stocks and options with quizzes to test yourself, for example. But you’ll need to figure out what’s important and then pick from the available lessons, as they’re scattered among a list of lessons that are much less relevant to newer investors. The broker also provides lessons on how to use its trading platform, but much of that may prove superfluous for investors just getting started.
All that said, 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. Again, this focus shows the broker’s pedigree as a haven for active and professional traders, and you’ll want to be aware of it if you’re expecting otherwise.
Still, Interactive Brokers offers fundamental analysis and market commentary, including significant access to free research resources as well as paid research services, all of which may appeal to both new and advanced investors.
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 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.