Interactive Brokers at a glance
*minimum, or $0.005 per share, but also cheaper with volume-based pricing
Top feature 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 and streaming news.
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 highly functional WebTrader, a platform that will still get the trading job done with its highly practical and no-frills interface. Or you can even trade from the account management page for those less-demanding orders.
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.
And as of July 2021, the broker has eliminated its minimum activity fee, which typically cost customers at least $10 a month if they didn't ring up at least the same amount in commissions.
Stocks and ETFs: On its Pro platform, Interactive Brokers’ headline rate for stock and exchange-traded funds (ETF) 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), 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, which debuted in 2019 as the industry slashed prices. 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 8,300 such mutual funds, and these reduced fees are great for beginning investors.
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 makes it stand 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.
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 9,000! 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.
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.
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 recently.
Interactive Brokers has cleaned up its account management site (which you have to log into separately, 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.
Interactive Brokers is definitely still geared toward active traders, though it’s introduced features that make it more suitable for newer investors as well.
- Interactive Brokers prides itself on its speedy trade execution and overall high-quality platform, with the ability to buy from seemingly any world market.
- The broker’s Lite tier allows smaller investors to get in the game without the commissions of the Pro platform, and fractional share buying is geared toward them.
- Uncommonly low margin rates are another attractive feature for more sophisticated investors
If the Pro platform’s commission structure turns you off, then you can turn to the no-commission Lite platform. Alternatively, you can opt for another major rival such as Charles Schwab or Fidelity Investments, both well-regarded for their investor-friendly service. Those looking for a wide selection of investments could have a look at TD Ameritrade, too.
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