Spoiler alert: There isn’t a one-size-fits-all brokerage firm for every type of investor. But if you pick the wrong one based on your experience and trading patterns, it could cost you money in fees and commissions — both of which eat into your investment returns.
Interactive Brokers might not be the best option for a newbie investor looking to buy and hold. But if you’re an experienced investor who trades frequently, it’s one of the best trading platforms out there. Here’s why.
Interactive Brokers review
Before we dig more into the details, here’s a list of things we like about Interactive Brokers, as well as some things to watch out for:
- It charges low, volume-based commissions.
- You’ll get a large selection of investment securities.
- It offers advanced tools to help experienced investors maximize their returns.
- It offers little investor education and advice for beginners.
- You have to meet minimum monthly trading requirements to avoid an inactivity fee.
- It has big minimum opening investment requirements.
Interactive Brokers investment accounts
Interactive Brokers offers several different accounts, depending on what your needs and goals are. The basic accounts individual investors can open include:
- Individual account, which requires a $10,000 minimum opening deposit
- Joint account, which requires a $10,000 minimum opening deposit
- Individual retirement account (IRA), which requires a $5,000 opening deposit
If you’re 25 years old or younger, Interactive Brokers offers a break on the minimum opening deposit for your IRA by lowering it to $3,000.
Once you set up an account with Interactive Brokers, you have a wide variety of securities in which you can invest, including:
- Mutual funds
- Exchange-traded funds (ETFs)
- Precious metals
Using the Interactive Brokers online platform
When you open an account with Interactive Brokers, you’ll have access to its sophisticated trading platform called the Trader Workstation (TWS). It’s a comprehensive platform but not very friendly to people who don’t already have a solid understanding of the market.
TWS offers real-time monitoring, watchlists, custom alerts, and a customizable dashboard so that you can focus on the market data you subscribe to.
Interactive Brokers does attempt to provide some education with its Traders’ Academy, which includes webinars, short videos, and courses on some of the securities you can trade on the broker’s platform.
But many of the topics Traders’ Academy covers assume at least an intermediate understanding of investing, so it might go over your head if you’re a beginner.
Interactive Brokers fees and commissions
For basic trading fees, Interactive Brokers offers two options:
- Fixed pricing structure
- Volume-based tiered pricing structure
Fixed pricing structure
With the fixed pricing structure, you’ll pay a flat $0.005 per share with a $1 minimum and a maximum of 0.5 percent of the value of the trade.
For example, if you trade 100 shares at $25 per share, you’ll pay $1 in fees:
100 x $0.005 per share = $0.50, which is less than the $1 minimum
If you trade 1,000 shares at $25 per share, you’ll pay $5 in fees:
1,000 x $0.005 per share = $5
And if you trade 1,000 shares at $0.25 per share, you’ll pay $1.25 in fees:
1,000 x $0.25 per share = $250 trade value
$250 x 0.5 percent = $1.25, which is the maximum per order
Volume-based tiered pricing structure
If you’re a high-volume trader, you can get even lower rates. If you opt for a volume-based tiered pricing structure, you can expect the following commissions per trade:
|Volume Per Month in Shares||Commission Per Share||Minimum Commission Per Order||Maximum Commission Per Order|
|Less than 300,000||$0.0035||$0.35||0.5 percent of the trade value|
|300,001 to 3,000,000||$0.002||$0.35||0.5 percent of the trade value|
|3,000,001 to 20,000,000||$0.0015||$0.35||0.5 percent of the trade value|
|20,000,001 to 100,000,000||$0.001||$0.35||0.5 percent of the trade value|
|More than 100,000,000||$0.0005||$0.35||0.5 percent of the trade value|
These commissions don’t, however, cover other fees like exchange, regulatory, and clearing fees. They also only apply to stocks, ETFs, exchange-traded products (ETPs), and warrants. All these fees can vary, depending on the exchange and security you trade.
Since Interactive Brokers is geared toward active investors, it requires that traders pay a minimum amount of commissions each month. Otherwise, it will charge an inactivity fee for the difference.
On accounts with a balance of $2,000 and above, the minimum monthly commission is $10. It’s $20 for accounts with less than $2,000.
So, for example, if you have $1,800 in your account and generate only $12 worth of commissions in a given month, the broker will charge $8 to bring your total charges up to the $20 minimum.
Interactive Brokers eligibility requirements
Interactive Brokers is designed for active traders who know what they’re doing. As a result, the broker requires that applicants have a good knowledge of the different products they plan to trade.
It also expects customers to have executed at least 100 trades before applying, or at least 100 simulated trades using the trading platform’s demo product.
To open an account, you have to be at least 18 years old and be a resident of any of these countries. If you want to open a margin account, which lets you borrow from the broker to leverage your trades, you have to be at least 21 years old.
Interactive Brokers customer service reviews
Although the broker shines in some areas, customer service isn’t one of them. Here are just a few customer reviews on the company’s Yelp page:
“As with many of the reviews say, their customer service isn’t all that great. But I also feel they have next to or no research available.” — Steve H.
“The authentication system is a nightmare. Since it usually fails, a call to support usually results in a 10-minute hold before getting through. Were it not for access to foreign exchanges, I would never use the account.” — Travis F.
“Very poor customer service! Just spent over an hour on the phone trying to connect to technical support so I can log into my account. From the response I got from them, seems this is rather typical.” — A.L.
If you have any questions about Interactive Brokers or need help after opening an account, you can contact the broker by email, phone, or live chat through your account.
The customer service phone number is 877-442-2757, and you can reach customer service Monday through Friday and Sunday.
Interactive Brokers review: Is it a good choice?
As we’ve already mentioned a few times, Interactive Brokers is a solid option if you know what you’re doing and you trade frequently. For most people, however, it’s not a great fit.
If you’re just starting out with investing or don’t want to deal with minimum trading requirements, consider the following alternatives:
|Broker||Commissions||Minimum Opening Deposit|
|Fidelity||$4.95 per trade||$0 or $2,500, depending on the account type|
|TD Ameritrade||$6.95 per trade||$0|
|Charles Schwab||$4.95 per trade||$1,000; waived if you commit to $100 automatic monthly deposits|
To ensure that you work with the right broker, be sure to research different brokers and look beyond the fees. For example, check to see what kind of investment advice they offer, and do a customer service check to see how you’d get help when you need it.
Once you find the right one, you’ll be able to invest without wondering whether you’re using the right platform.
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|0.15% – 0.35%||$0|
|0.49% – 0.89%||$25,000|