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What’s a Financial Plan, and How Do I Build One?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Do you have a financial plan? If not, you’re not alone. In fact, most Americans don’t have a written financial plan in place.For some, it may be they don’t feel like they have enough finances to plan anything. For others, the task of creating one just may get lost in the busy day-to-day bustle of life. But regardless of circumstances, everyone should have a financial plan. Research shows that having a plan leads to better financial habits, including saving more and accumulating less debt.

What is a financial plan?

In the simplest terms, a financial plan is an outline of your present and future financial goals and strategies to help you achieve them.

Brent Dickerson, a certified financial planner and owner of Over Coffee Financial in Cleveland, Ohio, said a financial plan is like a map for a long-distance road trip. “Even if you stray from your original route, a map will help you to get back on track or find another route,” he said. “Without a map, you can set off in the general direction of your destination and try and find your destination that way, but the odds are a lot less that you will end up where you want to be.”

6 steps to build a financial plan

So, how do you create a financial plan? It’s key to have something down in writing, rather than just a vague idea. For some, a financial plan may not go beyond setting goals and a monthly budget, while for others it will include investments, retirement plans, tax strategies and more. You can adjust your financial plan as your income and assets change and as you move closer to retirement, but everyone can benefit from one, no matter how basic. Here’s what to consider as you create your own.

1. Set financial goals

What do you want your life to look like in five years, 10 years, and beyond? Think about things like buying a home, paying for your children’s college, travel, and the age at which you want to retire. Get as specific as possible, and then prioritize those goals.

Though you may not achieve 100% of your goals, it will help you see which are most important to you. Often, knowing what you’re working toward can help make doing the hard work easier than if you’re working toward some vague idea of your future.

2. Review (or create) your budget

A budget is one of the best ways to see just where your money is going — and keep it from going out the window. A budget allows you to set goals based on your monthly income and expenditures and should also, ideally, include savings goals as well.

Once you’ve created a budget, monitor how well you’re sticking to it. That means tracking your expenditures, no matter how small (keep all your receipts!), as well as keeping up with recurring monthly payments for student loans, automobiles, your rent or mortgage and more. You can do it the old-fashioned way with pencil and paper, or a spreadsheet. There are a variety of free budgeting apps and software that can help, too. Whatever works best for you is fine, as long as you have a reliable way to track and review your budget regularly.

3. Build an emergency fund

Your car breaks down. You lose your job. You need to replace a roof that’s leaking rain right into your bedroom. The list of all the unexpected possibilities that aren’t in your budget goes on and on. There are no guarantees in life, and you should prepare for the unexpected — or you risk digging yourself into a deep financial hole.

Most experts suggest your emergency fund be at least three times your monthly expenditures (refer to your budget). You may need to save even more, however, if you’re married and have children or if you’re self-employed. As for where to keep your emergency savings fund, typically savings accounts or certificates of deposit are a good choice, as they allow you to earn interest but still provide easy access to your money with no or low penalties.

4. Work on paying down high-interest debt

Dean Hedeker, principal of Hedeker Wealth in the Chicago area, says the most important priority in your financial plan should be paying down high-interest debt, like credit cards. “If you think about it, credit cards and high-interest debt are designed to basically strangle you,” he said. “It’s the outsider owning you, rather than you owning the outsider.”

He says lower-interest debt, such as mortgages or student loans, may not need to be a priority. In fact, in some cases, you may be better off investing some of the money rather than paying down extra on very low-interest debt. For example, the rate of return on stock market investments over the long-term may outweigh the cost of a low-interest student loan.

5. Put money aside for the future

No matter how far away your “golden years” may seem, retirement savings should be a part of every financial plan. If your employer offers a retirement benefit, such as a 401(k) plan, this is often the easiest and most effective way to build a nest egg. A 401(k) allows you to invest money into an account that will then grow tax-deferred (traditional 401(k)) or tax-free (Roth 401(k)) until you reach retirement age. Because your contributions are typically deducted regularly from your paychecks, it’s an easy way to set and forget your investments.

If your employer doesn’t offer a retirement plan or if you’ve maxed out contributions to yours, you can also consider an individual retirement account (IRA), which offers many of the same benefits as 401(k)s.

6. Invest to grow your long-term wealth

So, you’ve maxed out your contributions to available retirement plans, established an emergency savings fund and paid off your high-interest debt. Now what? Hedeker says at this point, beyond investing in a house, “the stock market is the place to be,” as you can’t beat the average rate of return over the long run.

He said an easy way to jump into the stock market is to invest in some mutual funds that mirror the S&P 500 and set up automatic contributions each month. Then it’s just like another bill you pay. He said putting even $100 a month in the stock market can help you build up a significant amount of wealth over time.

Where to go if you need help creating a financial plan

Can you create a financial plan yourself? Sure, there’s plenty of information out there to help you if you are willing to put in the time and effort. The more complex your finances become and the more wealth you accumulate, however, the more time and effort it’s going to take. That’s where financial advisors come in.

Dickerson says the question to ask is how much time and effort you want to put into learning the myriad information that goes into a comprehensive financial plan. “If it were a simple task, everyone would do it themselves and few of us [financial planners] would have jobs because there would be no reason to pay for something that was easily done yourself.”

Beyond human advisors, there are also legions of robo-advisors available these days. These online services provide personal financial recommendations using algorithms based on the information you provide. Hedeker says robo-advisors serve a purpose and may be a good option in some cases for people with small accounts. However, he said they don’t offer the human factor that you may need as your finances become more complicated.

The most important thing when it comes to financial plans is that you have you one. It’s not something set in stone, but rather it’s a guiding force to help steer you where you want to go. Whether it’s one you DIY or one you develop with the help of a professional, having a written financial plan is one of the most important steps you can take to ensure your financial success.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Julie Ryan Evans
Julie Ryan Evans |

Julie Ryan Evans is a writer at MagnifyMoney. You can email Julie here

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Investing

E-Trade Review 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

E-Trade is a giant in the investing industry, and has plenty of products to offer. Whether you’re new to the investing world or make trades often, E-Trade offers a comprehensive lineup of trading platforms and user-friendly apps, plus a wide selection of educational resources.

However, there are still fees for specific types of accounts and features. You also won’t get much of a bonus for moving your money to E-Trade — unless you have tens of thousands of dollars.

E-Trade
Visit E-TradeSecuredon E-Trade’s secure site
The Bottom Line: E-Trade is a good choice for both active traders and beginning investors.

  • Choose between three customizable, feature-rich trading platforms.
  • Offers strong customer support via chat, email, phone, or more than 30 local branches
  • There is a minimum balance to open non-retirement accounts.

Who should consider E-Trade

E-Trade has solid offerings for both beginning and advanced investors. If you’re a frequent trader who needs both mobile and online platforms, E-Trade is a good choice.

Beginning investors will like E-Trade’s streamlined trading platform, many zero commission trading options, and its broad selection of commission-free mutual funds, which make diversification cheaper and simpler. And, for those who want a little more help, E-Trade provides pre-built portfolios for mutual funds and ETFs (minimum $500 and $2,500, respectively).

For advanced investors, E-Trade offers customizable trading tools and ample charting options. A full range of investment choices including stocks, options and futures allows advanced traders to take diversification to the next level.

E-Trade fees and features

Current promotions

New accounts with a deposit of at least $5,000, may be eligible for a cash bonus, which can range from $100 to $2,500 depending on the amount deposited.

Stock trading fees
  • $0.00 per trade
Amount minimum to open account
  • $500
Tradable securities
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
  • Options
  • Futures/Commodities
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $75 full account transfer fee
  • $25 partial account transfer fee
  • $0 yearly inactivity fee
Commission-free ETFs offered250
Mutual funds (no transaction fee) offered4400
Offers automated portfolio/robo-advisor
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • Coverdell Education Savings Account(ESA)
  • Custodial Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)
  • Custodial IRA
  • SEP IRA
  • Solo 401(k) (for small businesses)
  • SIMPLE IRA (Savings Incentive Match Plan for Employees)
  • Trust
  • Guardianship or Conservatorship
Ease of use
Mobile appiOS, Android
Customer supportPhone, 24/7 live support, Chat, Email, 30 branch locations
Research resources
  • SEC filings
  • Mutual fund reports
  • Earnings press releases

E-Trade trading platforms and tools

E-Trade offers three trading platforms: E-Trade Web, Power E-Trade and E-Trade Pro. There are also two mobile apps: The E-Trade Mobile app and the Power E-Trade app.

The standard E-Trade Web platform is for investors who are just starting out and new to investing basics but still want to manage their own portfolio. You can make trades, handle money transfers, check real-time quotes and commentary and get independent research from top news organizations.

The standard platform also gives you access to investment screeners, analyzers, backtesters and optimizers. If you’re new to investing or just need a refresher, there’s a library of articles and videos to help you educate yourself on the investing journey. There’s also access to market trends and active trader analysis.

Power E-Trade gives advanced investors risk/reward analysis and technical pattern recognition, helping users explore possible scenarios before they buy. A practice account option lets you trade stocks, options and other securities without rising real money.

E-Trade Pro is a full-featured trading platform geared toward experienced investors. Unlike the other platforms, users are charged $99.95 a month for E-Trade Pro. While E-Trade Pro is geared more toward advanced traders, its feature set is very similar to Power E-Trade, so before paying for E-Trade Pro, users should try out Power E-Trade.

E-Trade investment options

E-Trade lets you invest in a wide variety of asset classes, including:

  • Stocks (including non-U.S. stocks and penny stocks)
  • Bonds
  • CDs
  • ETFs
  • Fixed income
  • Mutual funds
  • Commodities
  • Gold, silver, other precious metals
  • Bitcoin and cryptocurrency
  • Futures

E-Trade charges no commissions on buying or selling U.S. stocks, ETFs, U.S. Treasuries and new-issue bonds. There are fees trade the following asset classes, including:

  • Bonds and CDs: There is a $10 minimum/$250 maximum commission per bond trade (except U.S. Treasuries and new-issue bonds) and for brokered CDs.
  • Futures: $1.50 per contract on futures and options on futures (except Bitcoin futures).
  • Options: $0.50 per contract on equity and index options when you place more than 30 stock, ETF, or option trades per quarter. Otherwise, it’s $0.65 per contract. It’s also $1.50 per contract for future options.

Fees for things like paper statements ($2), account transfers ($25-$75) and insufficient funds ($25), also apply.

E-Trade Core Portfolios

E-Trade Core Portfolios is the company’s robo-advisor platform. When you start with Core Portfolios, you’ll answer a short form with nine questions to verify what type of investor you are, what sort of risk tolerance you have, and your timeline until retirement. Core Portfolios then recommends two investment portfolios, comprising ETFs selected by the firm’s experts.

E-Trade doesn’t disclose the specific funds that make up each portfolio, although it does outline the portfolio’s asset allocation, plus a look at the 15-year historical returns for average, best-case and worst-case scenarios. The two options you’re presented with include a recommended portfolio and an alternative portfolio. All portfolios maintain a 4% cash allocation.

Because it’s an E-Trade product, you have the option to talk to an advisor at any of the company’s 30 branches. Some other robo-advisors don’t offer personalized human interaction, so this is an additional perk for hands-off investors.

Keep in mind that you need $500 to get started, with a 0.30% annual advisory fee. Other robo-advisors, like Betterment, don’t have account minimums and charge slightly lower annual advisory fees.

Strengths of E-Trade

  • Robust mobile and online apps: E-Trade offers two mobile apps and three online trading platforms. These apps and programs offer customizable account management, real-time quotes and access to news on demand. E-Trade’s purchase of OptionsHouse in 2016 also means skilled traders can easily access technical studies, charting tools and simple trade tickets to make high-volume trading easy.
  • Branch network: If you prefer in-person customer service and support, you’ll like the fact that E-Trade has more than 30 branches nationwide.
  • No required minimum to start: For taxable brokerage accounts, there are no minimum funding requirements.
  • Deep research. Before you even get started with E-Trade, you’ll have access to finding out which accounts work for you. Once you’re set up, read through research, market news, screeners and how your investments align with trends.

Drawbacks of E-Trade

  • Robo-advisor costs are higher. While a $500 starting investment isn’t much to get started with Core Portfolios, robo-advisor competitor Betterment doesn’t have a minimum to get started. Along with that, E-Trade charges a 0.30% annual advisory fee. That’s higher than the 0.25% charged by some competitors.
  • High minimum deposit required for account opening bonus: E-Trade touts its bonus incentives for depositing and transferring funds to its platform. However, you need to transfer very large balances to E-Trade to get the highest bonuses, so be sure to read the fine print first. For instance, to get the $600 bonus, you’ll need to deposit or transfer at least $250,000.
  • Some funds not offered. You’ll find plenty of offerings through E-Trade, as well as many different types of accounts to choose from. But you won’t find forex offerings from this company.

Is E-Trade safe?

If you’re looking for a safe platform to invest money, you have no worries with E-Trade. E-Trade bank accounts are FDIC-insured and they are compliant with all registration and license requirements. E-Trade is also a SIPC member, which means your account is protected for up to $500,000 in cash and securities.

Of course, while your accounts are protected in the event that E-Trade faces financial troubles, this doesn’t mean you can’t lose money in investment accounts. Stocks, bonds and other securities can decline in value and there’s always a risk associated with investing. That’s why it’s so important to understand any investments before you buy them.

Final thoughts

E-Trade offers options for novice investors and more experienced traders, including three different trading platforms and two mobile apps. Despite the account minimums and some fees that are higher than competitors, E-Trade is still a solid choice for most investors. If you don’t have the minimum amount to get started on any of the accounts that require it, you may want to look elsewhere. Otherwise, you have plenty of great options with E-Trade.

Fees mentioned in the article are accurate as of the date of publishing.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dori Zinn
Dori Zinn |

Dori Zinn is a writer at MagnifyMoney. You can email Dori here

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Investing

Interactive Brokers Review 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Interactive Brokers has a reputation as a comprehensive trading platform designed for experienced investors and investment professionals. Some of the features that distinguish this broker from its competitors are its extensive range of investment offerings, sophisticated trading platforms and minimal fees for margin trades.

More recently, Interactive Brokers has launched IBKR Lite, a service tailored to the needs of less-experienced or more casual investors. IBKR Lite offers commission-free trading of U.S. stocks and ETFs, plus more approachable versions of their well-regarded tools.

Interactive Brokers
Visit Interactive BrokersSecuredon Interactive Brokers’s secure site
The bottom line: Interactive Brokers offers a wide range of low-cost or no-cost trading options for both hands-on professionals and more casual investors.

  • Trade globally around the clock
  • Multiple pricing tiers to meet the needs of different investors
  • No account minimums required

Who should consider Interactive Brokers

Interactive Brokers’ IBKR Pro account is designed for active traders and investment professionals who need a platform for professional trading. The platform’s fee structure is flexible enough to accommodate different trading volumes, while keeping costs to a minimum.

The addition of IBKR Lite to Interactive Brokers’ product line-up gives beginning investors and more casual users with fee-free options for trading ETFs and U.S. stocks. It also lets them trade more complicated asset classes, like forex and fixed income, with different pricing options available.

Both account types offer margin trading, and both support a wide range of investments, giving you opportunities to build a portfolio beyond stocks or bonds with instruments like options, futures and forex.

Interactive Brokers fees and features

Current promotions

No minimum trading commission for three months ($10 minimum per month after that)

Stock trading fees
  • $1 per trade minimum fixed pricing ($0.005 / share)
  • $0.35 per trade minimum tiered pricing ($0.0035 / share)
  • $0.005 per share fixed pricing ($1 order minimum)
  • $0.0035 per share and lower based on volume ($0.35 order minimum)
Option trading fees
  • $0 / trade + $0.70 / contract, $1 order minimum
  • $0 / trade + $0.15 / contract, $1 order minimum (>100K contracts per month)
Amount minimum to open account
  • $0
Margin rate range2.82% - 3.70%
Tradable securities
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
  • Options
  • Futures / commodities
  • Forex
Account fees (annual, transfer, inactivity)
  • $10 monthly fee minus monthly trading commissions for most accounts
  • $0 full account transfer fee
  • $0 partial account transfer fee
  • $10 per month inactivity fee if trading commissions are less than $10 per month for most accounts
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Rollover IRA
  • Custodial Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)
  • SEP IRA
  • Trust
Commission-free ETFs offered
Mutual funds (no transaction fee) offered
Trading platform
Mobile appiOS, Android
Customer supportPhone, Chat, Email

Interactive Brokers fees and commissions

Interactive Brokers features a more complicated pricing scheme than many other brokers. You may choose either IBKR Pro for a full-featured investing experience, with fixed or tiered pricing. The IBKR Lite account has a user-friendly platform with both fee-free and commission fee trading options.

IBKR Lite fees

IBKR Lite allows for commission-free trading of U.S. exchange-listed stocks and exchange-traded funds. There is no minimum balance required for an IBKR Lite account and no monthly maintenance fee. In addition, IBKR Lite users can trade option, forex, fixed income and mutual funds, with commissions.

Investment typePricing structure
U.S. exchange-listed stocks/ETFsCommission-free
Other stocks/ETFsFixed fees
Options and FuturesFixed fees
ForexTiered fees
Fixed IncomeTiered fees
Mutual FundsFixed fees

IBKR Pro fees

With IBKR Pro, there is no commission-free trading. All trades are subject to either fixed or tiered pricing. IBKR Pro accounts have no minimum balance requirement but there is a monthly maintenance fee. That fee is up to $10 per month, less any commission fees paid for the month.

Investment typePricing structure
U.S. exchange-listed stocks/ETFsFixed or tiered fees
Other stocks/ETFsFixed or tiered fees
Options and futuresFixed or tiered fees
ForexTiered fees
Fixed incomeTiered fees
Mutual fundsFixed or tiered fees

Fixed pricing vs. tiered pricing

With Interactive Brokers’ fixed-fee pricing, investors pay just $0.005 per share, with a minimum order of $1. The maximum fee per order tops out at 1% of the trade’s total value. Using a $25 share price, trading 100 shares would result in a fee of $1. Trading 1,000 shares would increase the fee to just $5.

With tiered pricing, the commission fee is determined by monthly trading volume. At the lowest end, the fee amounts to $0.0005 per share and at the highest end, it comes to $0.0035 per share. This chart illustrates how tiered pricing breaks down:

Monthly volumeU.S. stocks, ETFs, ETPs and warrantsMinimum per orderMaximum per order

<= 300,000 shares

$0.0035$0.351.0% of trade value

300,001 - 3,000,000 Shares

$0.002$0.351.0% of trade value

3,000,001 - 20,000,000 shares

$0.0015$0.351.0% of trade value

20,000,001 - 100,000,000 shares

$0.001$0.351.0% of trade value

> 100,000,000 shares

$0.0005$0.351.0% of trade value

A key difference to note between the tiered and fixed pricing is that tiered commissions don’t include regulatory, exchange and clearing fees. The fixed pricing factors those fees in.

Trading platform and tools

Interactive Brokers offers different trading platforms for IBKR Lite and IBKR Pro users. At the IBKR Lite account level, investors manage their accounts through the Client Portal or the IBKR mobile app. This level of access offers these capabilities:

  • Execute trades and monitor account activity from an iOS or Android device
  • Check stock quotes
  • Review portfolio performance via monthly return charts
  • Examine key metrics, such as rate of return, profit and loss and buying power in real time
  • Review portfolio allocation and cash balances
  • Research individual securities and get the latest stock market news

The IBot chat feature is also available through the Client Portal and the IBKR mobile app. This feature allows you to trade stocks, options, futures, forex and bonds, get detailed quotes and account information and get answers to common trading questions quickly and easily. It can also be used with Facebook messenger and Alexa so you can access it virtually anywhere you are.

At the IBKR Pro level, investors have access to the Trader Workstation, which is considered a gold standard platform for professional traders. With this tool, you can trade stocks, options, futures, forex, bonds and funds on over 100 markets. Some of the key features of Trader Workstation include:

  • Real-time stock market monitoring
  • Up-to-date research and news
  • Advanced trading tools, such as algorithms simulators, market scanners and real-time charting and rebalancing

There’s also IBKR WebTrader, which is an HTML-based trading platform. WebTrader offers a more scaled-down range of features for traders who want a streamlined approach or for those who trade from behind a firewall.

The most advanced traders can take advantage of IBKR APIs. This allows you to build your own trading application or software.

Note, you’re not limited to choosing one platform over another. You can use one or all of the various trading tools at your disposal within your IBKR Pro account.

Investment options

Interactive Brokers is well-known for offering an extensive range of tradable assets. The types of securities you can trade through the platform include:

  • Stocks
  • Options
  • Futures and futures options
  • Commodities
  • Forex
  • Precious metals
  • Fixed income
  • Exchange-traded funds
  • Mutual funds
  • Hedge funds
  • Robo-portfolios

Both IBKR Lite and IBKR Pro members can trade on margin, and Interactive Brokers charges some of the lowest rates on margin loans of any brokerage. The platform uses a blended rate, based on margin balance.

As of writing in October 31, 2019, a $10,000 margin loan for an IBKR Lite account was subject to a blended APR of 4.07%. A $100,000 balance in an IBKR Pro account, on the other hand, was subject to a blended APR of 3.07%. Interactive Brokers offers a simple calculator to help traders estimate their blended rate for margin trading.

Research and education tools

Interactive Brokers offers an impressive number of educational resources for traders. Traders’ Academy, for instance, features complimentary courses on a variety of topics, including asset classes, foreign currencies and how to use the Trader Workstation to maximum advantage.

The IBKR education hub also includes both live and pre-recorded webinars, visual tutorials, calculators, widgets and a trader’s glossary. IBKR Trader’s Insight offers up-to-date discussion of the latest market trends and news while the IBKR Quant Blog features posts on advanced investing topics. Inside TWS Mosaic, Pro users can also get updates and analysis from platforms such as Reuters, Dow Jones, Morningstar and Zacks.

Strengths of Interactive Brokers

  • Trading platforms: The broker offers its standard trading platform as well as a professional-grade platform for active traders. For beginners and those submitting the occasional trade, the WebTrader standard platform works well enough. A basic page lists your holdings, account value, and a trade ticket, where you can enter orders one by one. It’s a no-frills package that does exactly what it promises with a minimal amount of fanfare. Advanced and active traders will appreciate the broker’s Trader Workstation, a fully featured platform that offers a range of tools. If you’re looking to give the platform a spin with a virtual trading account, Interactive Brokers offers a free trial.
  • Low trading costs: Interactive Brokers is obsessively focused on costs, and that’s most obvious in its stock commission. Customers won’t benefit just on stocks, though. Options have no base commission rate and are charged $0.15 to $0.65 per contract, based on trading volume, with a $1 minimum total. Mutual fund investors can access more than 4,200 funds without a transaction fee, and nearly 70% of those are no-load funds. This focus on low cost is a great boon to investors.
  • Access to global markets: Customers can invest in what feels like almost any global market, including those across Europe and the major markets of Asia-Pacific. Interactive Brokers also allows trading in foreign exchange, metals and fixed-income products for even more comprehensive diversification.
  • Margin rates: Interactive Brokers offers not only low trading costs but also low margin costs, about as close to the bottom as they can get and well below what other full-service brokers offer. At the lowest end, margin rates start at 2.20% (as of October 31, 2019), putting Interactive Brokers well below many of its competitors, which have minimum rates approaching the double-digit range.

Drawbacks of Interactive Brokers

  • Monthly account fees: If you’re an investor with a low account balance, the IBKR Pro account is probably not for you, especially if you’re not making many trades per month. That’s because it charges a $10 fee for IBKR Pro accounts of less than $100,000, unless you generate $10 in commissions each month. The fee is slightly higher – $20 – for accounts of less than $2,000. The good news is, IBKR Lite investors are not subject to any monthly fee if you trade less frequently.
  • Potentially overwhelming for newer investors: Interactive Brokers is like the Ferrari of brokers, in that it offers a premium range of investment options and tools. That being said, this platform may be a bit intimidating or overwhelming to use for the investing novice. While there’s a wealth of education and learning resources available on the platform, figuring out how to use them requires an investment of time. If you’re a newer investor who’s just looking to make some quick trades, another platform might be a better fit for your needs.

Is Interactive Brokers safe?

Interactive Brokers is trusted by many professional investors, and it’s their go-to broker. The company is focused on protecting your account and uses two-factor authentication when signing you in to prevent unauthorized access. Plus, accounts are protected by the Securities Investor Protection Corporation (SIPC), which guarantees accounts up to $500,000, including a cash-only limit of $250,000, in the event the broker cannot return the assets. Interactive Brokers goes a step further, though, for additional coverage of up to $30 million with Lloyd’s of London, with a cash sublimit of $900,000. These guarantees don’t protect you against losing money in the market, of course.

Final thoughts

Interactive Brokers brings a lot to the table, especially in terms of low costs. That extends to not only trading stocks but also options and the very attractive margin rates. For pros and active traders who know what they’re doing, Interactive Brokers is a great choice, especially now that account minimums have been eliminated. The option to trade U.S. exchange-listed stocks and ETFs in the IBKR Lite account allows it to maintain pace with its commission-free brokerage competitors.

Open an Interactive Brokers accountSecured
on Interactive Brokers’s secure website

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Lake
Rebecca Lake |

Rebecca Lake is a writer at MagnifyMoney. You can email Rebecca here