Interactive Brokers For Beginners - Overview, How To Open An Account And Buy Your First Shares

hey guys it's sasha interactive brokers is one of the biggest investing platforms in the world and they have just updated their pricing structure which suddenly makes them one of the best investing brokers in the uk and other countries as well until now interactive brokers was out of reach for regular investors because the platform was too expensive it had expensive fees but now that has completely changed in this video i will tell you all the key features of interactive brokers and explain how much it costs i'll also show you the steps how to open an account and buy your first stocks with interactive brokers and guess what this video is not sponsored by interactive brokers and i don't even have an affiliate link they have absolutely no idea who i am i just really like the platform so i thought i'd talk about it in this video now interactive brokers is a serious grown-up investing platform compared to some of the others compared to these new investing apps that you may know better like trading 212 or free trade detaro brokers is a few levels above in terms of features and functionality it's a bit like comparing a sports car to a child's push bike they don't update their terms conditions about once a month for no reason and they don't have weird clauses in them either but because of all of these extra features interactive brokers can also be a little bit more complicated to understand and use it is not as simple and minimalist as some of these other apps there are three different ways in which you can use the platform there is the web version and an app which is good but you can also download their trader workstation software if you really want to there is also a huge selection of things that you can trade if you're a regular investor stock ctfs and funds from all over the world are all available and the number of available stocks with interactive brokers is huge for more advanced users there's options and futures that are also available something you probably won't find on any of these cheap new platforms and then there's currency trading commodities and bonds as well they do all the things you'll want like fractional shares and as i said this thing is a whole lot more than the investing platforms i've talked about so far interactive brokers is a big public us company and it's listed on nasdaq with 3.2 billion dollars of cash sitting in the bank and processing 200 to 300 million customer transactions per quarter this is a very serious company with a very serious setup there are two downsides that i do want to highlight though there is no isa available in the uk which is a big deal for a lot of people and so interactive brokers may not be the right platform if you want to go and invest through a stocks and shares isa the other downside is that the platforms may be a little difficult to use at first if you do want to set up an isa i'll put a link in the description below to a video where i talk to you about the best ones available in the uk the other downside is that the platform may be a little bit difficult to use at first there are a lot of different options and settings and it might take you a little while to adjust from the minimalist layouts of these other apps but the reason the layout is complicated is there is just so much more in terms of features and functionality within the platform in fact that platform is so good that they allow some of the smaller startup brokers to use their platform as a customer in the uk for example trading 202 does exactly this they piggyback onto the interactive brokers platform for all of the technology and they just have a pretty customer-facing interface of their own that sits in front of it the whole technology behind it that executes the trades and manages your trading on 2.30 actually sits with interactive brokers but now interactive brokers has gone and made their platform cheap and for the sort of long-term investing that i want to do i think they might be one-off if not the cheapest platform in the uk at the moment so let's talk about the pricing the pricing here is a little bit complicated there are a lot of different tables and numbers but i'm just going to go and try to explain the basics because this is ridiculously good first off there is no platform fee there used to be a monthly fee that you'll have to pay to use the platform even if you're not making any trades and that made it somewhat expensive but that has just changed in the last few weeks there is now no monthly fee at all and no minimum number of trades yet to execute you can just go and sign up and you won't have to pay anything to maintain your account for making trades there are two different pricing structures tiered and fixed it does vary depending on which stocks you're buying but in general the tiered prices are better when you're buying smaller amounts anything under eight thousand dollars or thereabouts and the fixed pricing can be better for larger amounts now because most people will not be spending tens of thousands of dollars per trade i'd say the tiered pricing model is probably going to be the one that people want to pick now i did mention this pricing is not simple like it is with all these other apps but it is cheap here are some examples that might help us shares cost 0.035 per share with a minimum of 35 cents that's 0.35 of a cent per share that you buy and let's say i buy 10 shares of tesla 700 that's a transaction that's going to cost me about 7 000 now 10 shares times 0.0035 is 0.035 which is less than the minimum just 3.5 cents so i'm gonna have to pay 35 cents as the fee to buy 10 shares of tesla in fact if i buy anything less than 100 shares of tesla it's going to cost me just 35 cents there are some additional transaction fees added on but these are really negligible and unless you're paying huge amounts of money you probably won't see any of it coming through we're talking fractions of a cent here but then you will also have to pay a foreign transaction fee with interactive brokers you can load whatever currency you like into the platform and you can keep whatever currency you like on there you can keep multiple currencies which is super convenient because if i sell u.s stocks i don't have to go and pay the currency conversion fee every single time i do it for it to become pounds and then make pounds into dollars next time i want to trade but not only that the currency conversion fees are seriously good too you pay 0.2 basis points with a minimum of two dollars and the basis point here is one hundredth of one cent so unless you're exchanging over a hundred thousand dollars you're basically just gonna be paying two dollars per exchange so again if you're only depositing a small amount like say a hundred dollars this is going to be pretty expensive that's going to be a two percent fee because it's always gonna be two dollars but if you put in say one thousand dollars in one go then that conversion will only cost you 0.2 percent and this is already really cheap compared to these new apps because you only have to do it once not on every transaction so if i use the previous example and i deposit 7 000 to buy those 10 tesla shares then a foreign exchange fee of two dollars will only be not point not three percent and if i add the 35 cents that i'll have to pay for the transaction i'm gonna pay a total of two dollars and thirty five cents which will be about 0.034 percent which is five times cheaper than trading two on two so interactive brokers is not a good option if you're wanting to put in lower amounts the cheap apps will still be better you can go and check out my links in the description for videos about some of those other platforms if you're interested but if you're wanting to invest in regular stocks and your deposits will be say 1 500 or more in one go that's about a thousand pounds then interactive brokers becomes really cheap remember that it's a conversion to dollars that cost two dollars each time you do it but each trade after that will only cost you 35 cents for most shares so if you're not spending huge amounts that's actually really cheap even on just a hundred dollar trade you're only going to be paying 0.35 which is still in my opinion pretty good value for me even if i wanted to make some smaller trades than that i'm still pretty happy because on average it is still going to be much cheaper than using other platforms and i'm happy to pay the extra for the security and functionality on those smaller trades so let's quickly open an account and walk through the whole process step by step first you need to go to the interactive brokers website make sure you try to go for the uk website it'll be easier i'm gonna link that website in the description below it's not an affiliate link and once you're on it you need to click open an account and type in your email and username after that you're going to get an email with a link to complete the rest of your application and this application will then ask you a load more questions which will be a bit more thorough and a bit more in depth than some of those other investing apps that maybe you already have first you have to select your account type and that question is not that easy most people watching this video though probably will want just a regular individual investing account then you have to provide a bunch of personal information your name address phone number identity documentation your employment details and some information about your income you can then choose your base currency for the account and i chose us dollars when i first created the account but in truth that setting doesn't really affect anything you can hold money in multiple different currencies within that account regardless of what your base currency is and the base currency is only really used for your statements and reports through the platform and since i live and pay my taxes in the uk i actually afterwards went and changed that base currency back to pounds after creating the account to save me manually having to do the numbers when i have to submit my tax returns in the uk you get a choice of three different account types margin portfolio margin and cash cash is the regular investing type of account and margin accounts require relatively high minimum amounts of about twenty five thousand or a hundred thousand dollars and i think that almost everyone watching this video would probably want to select the cash account here next up you want to tell interactive brokers a bit about your investing background now make sure that you're honest here these are not there to try to get you to answer the right answer or the wrong answer this is to ensure that the products available to you the markets available to you are suitable that they are correct for your level of understanding new level of experience it is a really good idea here to give actual honest answers depending on what you say they might ask some additional questions go and answer them as appropriate you also need to add which products and markets you want to have available in your account now you can always add more later so i wouldn't try to put everything down here at the beginning stocks is probably what most people are here for and what they are coming to the platform to use so i went and selected that as well as a few other things and i selected all the available markets just before you continue there is one super interesting question you can enroll in the stock yield enhancement program this allows interactive brokers to lend your shares out to hedge funds and the like and you get to earn half the money that those people pay for borrowing your shares that is pretty cool not only do you have complete control here but you also get paid for your shares being lent out instead of your broker getting to keep all of that revenue the next step is to confirm that you are not a us person for tax purposes and you can get the lower 15 withholding tax and dividends and that's it hit submit and it's all done to complete the process you need to send a photo of a document confirming your address i submitted my driving license it says it'll take one to three business days to approve but mine actually only took about 10 minutes so hopefully it'll be pretty fast for you as well so now your account is open and the next step is to deposit some money this is how it works in the uk go and click deposit and it'll ask you how much you want to deposit afterwards it'll give you a reference code made up of some letters and numbers and you'll need to go to your bank and make a payment to the bank account that they provide to you and put that code in as the reference now again it said that it will take about a business day or possibly longer for my money to turn up but it actually landed in my account in just about 10 minutes so the whole process end to end when i was doing the application only took about 25 minutes from start to finish including the waiting time and i could trade pretty quickly i did all of this before the markets opened there are two more steps that i did before buying shares first i changed my pricing plan fixed to tiered you can try both out to see what how much is going to cost you to buy the shares but for smaller accounts with smaller amounts like mine tier pricing i think is what you will want to go for because i think it's cheaper and then you're going to have to convert your money now you can deposit money in other currencies you can deposit money in whatever different currencies that are available but the conversion on the platform is so cheap that it's much cheaper to deposit pounds in my case and then converting to dollars within the platform than trying to work around some other way of doing it i deposited 5200 pounds and it cost me just two dollars remember that two dollars fee to convert that into seven thousand two hundred dollars or thereabouts that is less than 0.03 on the foreign exchange fee remember that many other big apps charge one percent which is 36 times more expensive and even the likes of trading 212 which everyone thinks is cheap charged 0.15 which is more than five times as expensive and because you keep the money in dollars after you've done the conversion you don't have to do the conversion every single time you trade that means you don't have to pay that fee every single time you trade so this makes it unbelievably cheap now whenever you want to buy or sell stocks you need to make sure that you have the relevant currency in your account that's how this platform works you can't buy us stocks if you only have pounds so before you do trades in say u.s companies you need to go and convert that money into dollars first so now it is time to go and buy some shares now i wanted to go and buy some tesla shares so i typed tsla tesla into the search bar and clicked buy now you can select the number of shares or the amount of money that you want to buy and the order type i found i had to round down the amount to the nearest dollar because it didn't like the sense at the end it didn't like using because it rounded up to the nearest dollar and said i didn't have enough money in my account so i went and bought about 7 200 worth of tesla shares and you can see that the interactive brokers routed the whole shares path through something called island and i got the 0.15 fractional shares from interactive brokers themselves so in the end i ended up depositing 5 200 pounds and i got 10.1537 shares of tesla plus i still have three dollars and 30 cents left over as cash because i rounded down a few more dollars than i needed to for no particular reason now the exchange rate i got on the day was 1.38505 which was bang on what the real life spot rate was at the time i just went into google and it was exactly the same i bought my tesla shares for just under 709 on average as you can see here and the cost you can go and find what the cost of that was by hitting reports then other reports then transaction cost analysis now my transaction cost analysis didn't show up until about a day or two later so if you go and click on it and it doesn't show those costs just wait and it'll turn up so you can see here that i paid two dollars for the cash conversion it shows it in my base currency here so one pound 45 and i also paid 35 cents for the shares again it shows it up in pounds it's 24p and that is just bonkers that transaction cost me 0.93 in total including the foreign exchange fee this is way cheaper than any of the other options i know and if i choose to say sell those shares in the future and then buy something else with the money say some other us company i'm gonna have to pay 35 cents to sell and another 35 cents to buy which is way cheaper than this 0.03 that i just did because i don't have to pay for an exchange fee every time this is crazy and i am liking this a lot so i'm actually in the process of moving all of my non-iso money into interactive brokers and we'll be using more of that platform in the future i've just sold out of all of my other non-iso positions and i'm waiting for the money to move over now if you found this video useful if you found it interesting please don't forget to smash the like button for youtube algorithm thank you so much for watching i really appreciate it and as always i'll see you guys later [Music]

Channel: Sasha Yanshin

Views: 27,072

Keywords: interactive brokers, interactive brokers review 2021, interactive brokers review, interactive brokers tutorial, ibkr tutorial, ibkr review, ibkr setup, ibkr trading platform, interactive brokers platform, interactive brokers setup, interactive brokers fees, interactive brokers for beginners, interactive brokers fees explained, ibkr for beginners, ibkr fees, ibkr fractional shares, ibkr fees explained, best investing apps, best investing apps 2021

Id: 7myImmNPAFU

Length: 16min 19sec (979 seconds)

Published: Fri Aug 13 2021