Interactive Brokers has long been known as a brokerage for serious traders, and the company maintains that reputation this year. Its low-cost trades for both Stocks and Options and its no-frills software interface make the broker a favorite for thrifty customers. However, it’s unfortunate that some standard features at other full-service brokers cost extra here.
Who should consider Interactive Brokers
Interactive Brokers should appeal to the fan of low costs inside all of us, but only those with higher account balances are going to be truly enamored with this broker. Still, active traders and professionals will love the company because of its low prices and discounts for volume.
In fact, any advanced trader or investor probably will like the broker’s no-nonsense platform. They’ll also like the low margin rates and options pricing. While these are things beginning investors may appreciate too, those with less experience may need more customer support and overall guidance than Interactive Brokers is able to quickly provide.
Interactive Brokers fees and features
No minimum trading commission for three months ($10 minimum per month after that)
|Stock trading fees|
|Option trading fees|
|Amount minimum to open account|
|Margin rate range||2.82% - 3.70%|
|Account fees (annual, transfer, inactivity)|
|Commission-free ETFs offered|
|Mutual funds (no transaction fee) offered|
|Mobile app||iOS, Android|
|Customer support||Phone, Chat, Email|
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 standard platform (called WebTrader) 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 minimum amount of fanfare. Advanced and active traders will appreciate the broker’s Trader Workstation, a fully featured platform that offers a range of tools. The dashboard provides real-time quotes and monitoring, trade alerts, and watchlists. It’s fully customizable and allows you to chart stocks and test out trading strategies too. If you’re looking to give the platform a spin with a virtual trading account, Interactive Brokers offers a three-month free trial. If you like it, you can transfer your settings over to your live account.
- Low trading costs: Interactive Brokers is obsessively focused on costs, and that’s most obvious in its stock commission — just half a penny ($0.005) per share, with a $1 minimum per trade. So a 50-share trade costs the same as a 200-share trade, but above 200 shares, the price rises at a rate of half a penny per share. Still, you need to trade nearly 1,000 shares to reach the $4.95 commissions offered at top brokers such as Charles Schwab and Fidelity. However, things get even cheaper if you’re a high-volume trader. Customers won’t benefit on stocks alone, though. Options have no base commission rate and typically are charged just $0.70 per contract, with a $1 minimum total. Mutual fund investors can access more than 4,500 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. You’ll feel like you have to access to everything.
- 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. (Really, it’s not even close!) The broker charges the benchmark rate plus 1.5% for margin balance below $100,000, progressively declining to a premium of 0.3% for balances above $200 million. That’s incredibly cheap and allows investors to use margin effectively in situations where they wouldn’t be able to at other brokers.
Drawbacks of Interactive Brokers
- Monthly account fees: If you’re an investor with a low account balance, Interactive Brokers may not be for you, especially if you’re not making many trades per month. That’s because it charges a $10 fee for accounts of less than $100,000, unless you generate $10 in commissions each month. That fee is even steeper — $20 — for accounts of less than $2,000. While it’s annoying to have this minimum, it’s the equivalent of about two trades at almost any other full-service broker, so it’s not exactly breaking the bank.
- Fees, fees, fees: Interactive Brokers is like the Ferrari of brokers. What it does well is great, but all the extras cost more. Want real-time data? There might be a fee for that, depending on what level and kinds of data you want. And the fundamental research you obtain at other brokers as part of your trading fee? No, though there are some subscription services that offer trading information. That said, Interactive Brokers does not charge a transfer-out fee, when virtually every other broker does.
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. These guarantees don’t protect you against losing money in the market, of course.
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.
Interactive Brokers’ obsessive focus on a low-cost experience is great if you need low costs above all else. If it’s not and you need more services and features, such as customer support, educational tools and research, then you might be better served by Charles Schwab or Fidelity, which excel in these areas.