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Interactive Brokers stands out in offering the lowest possible commissions and margin rates, which makes it a solid option to consider for stock trading. In this Interactive Brokers review, we’ll explain how the online stock broker compares on key factors we think are most important to consider before opening an account. Find out more about the pros and cons below.
A great low cost option for small trade volume. While the interface isn't as clean or modern as other brokers, it get's the job done. Interactive Brokers is also a great choice for options investors, traders, and those trading on margin.
$0 per trade
See Interactive Brokers website for more details.
Designed for active traders and sophisticated investors, Interactive Brokers may not be a best online stock broker for everyone. However, it does have some killer features that make it stand out from the pack:
Before we get into a discussion of Interactive Brokers' pricing, it's important to mention that there are two pricing plans customers can choose. The IBRK Pro plan offers more features that appeal to frequent and professional traders and charges significantly lower rates on margin loans. On the other hand, the IBRK Lite plan has commission-free trading but is lighter on features and has higher interest rates for margin loans.
Whereas most discount brokers employ a flat-rate commission schedule, Interactive Brokers’ commissions are variable, increasing with the size of the trade. Interactive Brokers’ commissions are detailed in the table below.
|Stocks and ETFs||Mutual funds|
|Stocks and ETFs $0.005 per share (minimum $1), $0 on IBKR Lite platform||$14.95 per transaction|
|$0.65 per contract for options priced at $0.10 or more|
|$0.50 per contract for options priced at $0.05 to $0.09|
|$0.25 per contract for options priced at less than $0.05|
The variable commission schedule makes Interactive Brokers one of the cheapest brokers for small trades. For example, to purchase 200 shares of Apple, currently worth more than $56,000, an Interactive Brokers customer on the IBKR Pro platform would pay just $1 to make the trade, while customers who opt for the lower-frills IBKR Lite platform, which is fine for the majority of investors, would pay no commissions at all.
Interactive Brokers may be built for active stock traders, but it doesn’t leave fund investors behind. It offers more than 10,200 mutual funds, of which more than 4,300 can be purchased without paying its standard transaction fee ($14.95).
|Total mutual funds||More than 10,200|
|No-transaction-fee mutual funds||More than 4,300|
Because Interactive Brokers is designed for active traders and sophisticated investors, it has a few quirks in its list of fees that warrant additional discussion.
If you are an infrequent trader, or have less than $100,000 to keep in your account, the $10 minimum monthly commission may sway you away from Interactive Brokers' Pro platform, and the IBRK Lite platform could be the better choice for you. Given many brokers charge $4.95 per stock trade, with no minimum monthly commission requirements, Interactive Brokers is costlier for people who simply want to place the occasional trade.
Customers will find that Interactive Brokers has several different trading platforms designed for the needs of active traders and long-term investors alike. Its platform earns high reviews from active traders who appreciate access to a fully-featured trading platform on their desktop.
Here are the platforms Interactive Brokers has to offer:
As long-term buy and hold investors, we don’t necessarily make full use of all the bells and whistles of a fully-featured trading platform. Frankly, the impressive functionality offered by its desktop platform, IB TWS, can be as much of an advantage for active traders as it is a disadvantage for inexperienced investors.
New investors seeking a good stock broker for beginners may be put off by all the moving parts of its desktop platform. Even the basics can be overwhelming since the platform is built to offer access to so many different markets. For example, after entering in a ticker symbol for a popular ETF, the platform prompted us to select whether we wanted a quote for the stock, options, or futures contracts based on its value. It’s simple to navigate, but new investors may be lost in the shuffle.
It’s safe to say that margin lending is Interactive Brokers’ special sauce. Most competing discount brokers charge two to three times more for margin loans than Interactive Brokers. If margin is central to your trading or investing strategy, its low interest rates may alone be a reason to put it on the short list of brokers to choose from.
Margin rates decrease as you borrow more, and IBKR Pro customers receive lower margin rates than IBKR Lite customers do. The table below shows its interest rates based on your debit balance.
|Margin balance||Interest rate (IBKR Pro/IBKR Lite)|
|$100,000 or less||3.05%/4.05%|
|$100,001 to $1,000,000||2.55%/4.05%|
|$1,000,001 to $3,000,000||2.05%/4.05%|
|$3,000,001 to $200,000,000||1.85%/4.05%|
|More than $200,000,001||1.85%/4.05%|
The table above is indicative of the brokerage’s focus on high value accounts, financial professionals, and active traders. Few brokers even bother to publish margin rates for amounts in excess of $2 million-$5 million. That Interactive Brokers publishes margin rates for loans in excess of $200 million says a lot about the service from the get go.
Interactive Brokers also deserves some praise for using a clear and easy-to-understand method for calculating its margin interest rates. The brokerage adds a spread to the Federal Funds Effective Overnight Rate, whereas other brokers substitute their own proprietary benchmark to calculate interest charged to customers who have a debit balance.
Primarily an online brokerage, Interactive Brokers doesn’t have a large branch footprint like many of the largest retail discount broker firms. That said, it offers support 24 hours a day by phone, chat, or a secure message through its account center.
This brokerage offers a wealth of research, with a catch: Not all of it is free, as certain research providers charge a flat-rate monthly subscription fee for access. We’ll explain in more detail. For now, we’ll focus on what is free:
We haven’t even scratched the surface of what Interactive Brokers has to offer in free news and screeners -- going through every tool would take hours, if not days -- but it’s certain that it ranks among the top of the list as far as its screening tools go.
Of course, there’s a downside: Research you might expect to receive for free at other brokers isn’t free at Interactive Brokers. For example, many brokers offer Morningstar equity research reports for free, but Interactive Brokers’ non-professional customers pay about $14 per month for the service. That said, a la carte research and news options are plentiful, and many offer a free trial so you can see what you’ll get before you commit to a monthly charge for access.
If the following statements apply to you, Interactive Brokers should make a short list of places to open your next brokerage account.
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