INTERACTIVE BROKERS REVIEW 2021 - The Good, The Bad And The Ugly (For Investing)

hey guys it's sasha and in this video i will do a complete review of the interactive brokers investing platform i will go through all the features share all the good and all the bad things about the platform and i'll explain the pricing structure for many investors interactive brokers is the cheapest platform out there cheaper than all the new fancy investing apps and i'm going to explain why and how not that you would know it because the way that they explain their pricing is actually pretty difficult to understand so i'm going to break it down make it super simple with some examples by the way their pricing structure completely changed about three months ago they've become much cheaper than they used to be and there are no more account fees that they used to have so if you see some other people talk about it or you read about it ignore all that because that is no longer the case i have used the platform for over two months now and i picked up a lot of its quirks and i wanted to share some of these with you some are really good and some are not let's start with the basics interactive brokers is a huge international platform and they are literally available all over the world they have customers in 220 different countries so wherever you live pretty much even if it's in palestine the vatican or if you are in penguin in antarctica you can go and open an interactive brokers account if you used some of the new platforms like robin hood or weeble in the us or trading 212 etoro or free trade in other countries you will notice that interactive brokers is not quite as simple it is not quite as slick it is not as minimalist it is not as clear but it also has a huge list of features you can do everything on interactive brokers it is incredibly sophisticated compared to all of these other platforms and allows you to do just so much more it is a serious machine with serious power under the bonnet you can trade stocks on the ibkr platform from all over the world the choice of stocks is the best i have seen anywhere i am yet to find stocks that i am genuinely in any way interested to look at that isn't on the platform but you can do a whole lot more than that too you can trade options which i know some people are interested in and you can also trade commodities futures buy into different kinds of funds none of this is available on most of these other platforms but there's more you can trade currency bonds and cfds as well so as i mentioned you can do pretty much anything now i'm not going to cover most of these things because i am an investing channel and i myself i'm an investor so i'm going to come in from that perspective and ignore some of the other bits if you want some of the other bits go and do your own research you can use their website or the app and interactive brokers also has a downloadable trading tool if you want to get particularly serious and you have all the information you might possibly need right there on the platform you've got charts that offer incredible amount of detail you have the full financial data and you have analyst data and forecasts the latest news you have literally everything you might want from an investing platform right there this is seriously good and far far more comprehensive than any of these new apps certainly any any of the apps that i have personally used they do all the usual stuff you would expect you have fractional shares different types of orders the whole shebang there are two big downsides that i want to point out though right now if you live in the uk interactive brokers do not offer a stocks and shares isa account which allows you to invest tax-free so that might be a deal-breaker for some people and i think the same is true in some other countries as well if those countries have their own local tax-free investing account options you might not be able to get it on interactive brokers and the other downside is that it is quite a bit less intuitive to use and a bit more complicated if you're new to investing you might have to click around quite a bit just to figure out where things are or how to actually do things it also also has some really weird niggles that i found for example if you want to make it trade and you want to spend all of the money in one go in the account to make that trade it won't let you do it but it won't tell you just for an error and that's because when you make these trades you have to actually leave a little bit of money behind for the fees that that trade will cost and you'd think that they would figure it out automatically what the amount of fees is going to be set that aside as part of the transaction and kind of show to you but no you have to go and work it out yourself and you have to leave a little bit of cash in your account to do that when you create an interactive broker's account one really important thing that you'll have to do is to select your base currency now don't worry too much because you can actually change it later but this is a somewhat important step especially if you live outside the us the base currency does two things it is the currency in which your fees will be charged and it is also the currency in which all of your reports will be presented but it doesn't affect anything else uh some people misunderstand this choosing dollars to be your base currency if you live in the uk for example will not make the platform cheaper or more expensive to use it doesn't affect the pricing at all and so it makes a whole lot of sense to use your home currency in whichever country it is that you live as the base currency because it makes submitting your tax returns for example at the end of the year super easy everything is already in that currency you don't have to manually recalculate every single trade and every single number afterwards interactive brokers lets you keep money on the platform in whichever currency you choose you can keep multiple different currencies so you can have pounds you can have euros you can have dollars all in the same platform and you can move the money between them which is incredibly handy and this is really important because it means you don't have to keep paying foreign exchange fees over and over every single time you make a trade like with most of these other platforms like they force you to do and their foreign exchange fees are super cheap it is much cheaper for me to load money into interactive brokers in pounds and convert it into dollars through the platform then to try to bypass that and try to somehow load dollars in instead one limitation is that you can only deposit money via bank transfer if you live in uk or some other countries you can't go and use a card or some of the other payment methods but the deposit went through pretty quickly for me in fact everything worked really quite fast so it doesn't really bother me at all when i submitted some documents despite the onboarding and when i made the deposit it said maybe it'll take a day or two to process but in all those cases it took maybe a few minutes or maybe about an hour or so so i was pretty happy with that by the way i'm gonna put a link in the description where i have a separate video which walks through the entire onboarding process and explains every single step if you want to go and watch it the link will be in the description below all right let's talk about pricing because pricing here for interactive brokers is complicated it is really cheap but it is also really complicated first let's quickly talk about the foreign exchange fee unlike other platforms you have maybe used before foreign exchange and making trades are separate things with interactive brokers so if you deposit some british pounds into the interactive brokers platform and then you want to buy u.s stocks you'll have to go and exchange that money into dollars first and then once you have those dollars in your account you can then use them to buy your stocks so you're essentially doing two separate things using the interactive brokers fx trading feature first to buy your dollars and then using the share trading feature afterwards but this is actually really good if you then go and sell out of that u.s stock you get your dollars back and you can then buy a different us stock with those dollars without having to pay two lots of foreign exchange fee on selling and buying but the fund exchange fee is actually really simple compared to the trade fees it's just it's really simple it's just two dollars per exchange that's it so you don't want to be making frequent and small exchanges because each time you do it you'll have to pay two dollars if you exchange a hundred dollars the fee is two dollars two percent if you exchange ten thousand dollars the fee is still two dollars in fact anything up to one million dollars will cost you just two dollars if you are a bowler and you want to exchange more than one million you're in luck it does actually get cheaper but anyway the foreign exchange is very cheap for example on 1 000 uh deposit and conversion that's only not 0.2 in foreign exchange fees which is comparable to the cheapest options available elsewhere now on 10 000 it drops to all the way down to 0.92 that's very very cheap miles cheaper than any other platform available in the uk i made two deposits into interactive brokers one for 5 200 pounds and one for 8 000 pounds and i paid two lots of two dollars to convert those which cost me a grand total of two pounds eighty nine which is not point naught two two percent that's about twenty times cheaper than the cheapest apps available in the uk like free trade or stake okay so let's now talk about trade pricing because that's the only other thing that you have to pay there are no monthly account fees or anything else like that as i mentioned there are two pricing structures for buying and selling stocks or etfs there is fixed and there is tiered and the information on the website is pretty hard to understand so here is my simplified version if you are making huge trades several hundreds of thousands or millions of shares in one go then tiered pricing is cheaper pretty much every single time but for everyone who isn't a billionaire or a hedge fund manager it depends on what you're doing and it's actually kind of simple it depends on two main things which country you're buying the stocks in and the type of trade you're making as well as the total amount that you're spending and the price of the individual shares in the trade you're making all right generally speaking for the vast majority of people who don't do huge transactions the tiered option will be cheaper especially for shares that are a bit more expensive by the way you can actually change your account from tiered to fixed and back whenever you want to so you don't have to just pick it at the outset and then stick with it you can do it in your account settings just remember it takes one business day to update so you can't just keep switching multiple times during the day for each different trade so for us dogs it is pretty straightforward i'll explain it first and then give you some examples for all other countries i'm not going to go through them because they all work in slightly different ways you'll need to go and do your own homework if you wanting to trade shares in other markets in the vast majority of cases the tiered pricing structure will be cheaper just just if you're if you're wondering uh that is it but if you're trading shares that cost less per share or if you're trading particularly large amounts then the fixed pricing structure can become cheaper i'm going to show you some examples the truth is both of these options actually come out incredibly cheap so in the grand scheme of things it doesn't really matter all that much it is still a great deal but here are a few examples the fixed tier just charges you a flat half a cent per share to trade but there is a one dollar minimum the tier tier charges you two separate fees they charge you 0.35 cents per share plus the exchange fee the 0.35 cents per share has a minimum of 35 cents total per transaction so if you're buying under 100 shares of anything that bid is always going to be just 35 cents the exchange fee bit sounds complicated but simply is this if you place a market order that executes immediately you pay 0.3 cents per share if you go and make an immediate trade that happens right away at whatever the market price is right now you'll pay that 0.3 cents per share on top of the 0.35 cents per share that interactive brokers charges you so the total will be 0.65 cents per share if that makes sense but if you place a pending order of any kind then instead you get a 21 cents a rebate you get 21 cents taken off your fee so that's a really important thing to consider if you place a limit order for example just be careful if you place a limit order which is a pending order but set the limit price to execute immediately so if you're buying you set the price so that it will definitely execute it'll still count as being a market order so the exchange basically likes having orders pending because that means that people can make instant trades the exchange likes people to add pending orders to their list so that they can do more business that's why when you're adding depending orders rather than taking pending orders away by matching them you get that discount because you are adding liquidity to the market anyway this got a bit technical here what does this all mean let's do some real life examples first let's say you're buying expensive shares for example tesla right now tesla's just broken its all-time highs but let's round it down to just 900 to keep the numbers easier let's say you go and buy 10 shares of tesla for 9 000 with a fixed pricing it costs 0.5 cents per share times 10 shares so that equals five cents but the minimum remember is one dollar so for that trade you will pay one dollar you can see that with expensive shares the fixed pricing is always going to be one dollar pretty much unless you're making huge trades the tiered price structure is not 0.35 cents per share times 10 equals three and a half cents but again 35 cents is the minimum and so that's where you're gonna have to pay then we have to add the second bit the exchange fee now even if you're doing a market trade that only adds another 0.3 cents per share so 10 shares times 0.3 cents equals 3 cents so the total is that 3 cents plus the 35 cents that interactive brokers took 38 cents in total so the tiered price is cheaper here you are paying 38 cents to transact 9 000 that's not point not not 4 incredible so with expensive shares the tier price will be cheaper and it's ridiculous how cheap it is and although the fixed price is almost three times as much it is still super cheap it is only naught point not one percent so okay let's do another example to show you how this can work uh when the share price is a little bit cheaper let's say you're buying shares of palantir for example and let's say they cost 25 dollars rounding it up um let's say you buy 1 000 shares for a total of 25 thousand dollars the fixed tier price again half a cent times one thousand shares equals five dollars the tiered price is not point three five cents per share so that's not point three five cents times one thousand equals 3.50 now 3.50 is less than the five dollars but now you have to add that bit from the exchange so if you do the market trade you'll pay an extra 0.3 cents per share so it's an extra three dollars so the total will be 6.50 and in this case the fixed price will actually be cheaper because five dollars is cheaper than six pounds 6.50 but if you go and place a limit order instead and wait for it to execute you will get that 21 cent rebate per share sorry not point two one cent per share rebate so you'll get two dollars ten back to the total cost of that transaction so you'll get three dollars fifty minus 2.10 equals 1.40 in total fees 1.40 in fees to make a 25 000 transaction so you can see this is ridiculously cheap that most expensive option is 0.926 percent because you're still only paying 6.50 to make a 25 000 transaction but it is still cheap even if you do smaller transactions you don't have to do a 25 thousand dollar transaction to make use of these cheap fees especially if you do a pending order to get that rebate so if you go and buy just four shares of plenty for example for a hundred dollars you'll pay 35 cents for the transaction on the tiered pricing list because that's the minimum you can't pay less than that and then you'll pay one cent for that exchange fee on top so the total will cost you 36 cents 36 cents which is not 0.36 percent so it's relatively more expensive than the larger amounts but it's still less than 0.45 which is what it costs on a cheap very popular platform in the uk like free trade okay i hope that wasn't too complicated basically interactive brokers is very cheap if you make large enough deposits because it costs a fixed two dollars each time that you have to convert that currency and although the pricing is a bit complicated it is really really cheap you're paying tiny fractions of a percent whenever you're making trades of at least a few hundred dollars or more it is not a good platform if you want to go and do micro transactions like say buying five dollars of a stock very small fractional shares and having lots of them if you want to do that you'll want to use one of these other platforms instead because they'll be far better and far cheaper for you there's one really cool thing i noticed though that i want to share interactive brokers works with a whole lot of different entities for making these trades they work directly with the market with different market makers and many of these other cheap platforms only have like one and so i noticed when i was making these trades i usually actually got exceptionally good prices on what i was buying i often got a cheaper price on the stocks than what the live data was showing and there was a bit of margin and i was extremely surprised and very happy it was the same for currency conversion even with that two dollar fee i got a better net rate including that fee than what the rate was showing when i literally googled it at exactly the same time so you'll pay those small fees but i actually think that because of these benefits and how they execute the transactions you might be able to get a better deal on those trades even including of the fee than the completely free apps because the prices tend to be really good on this and i didn't notice the prices being this good on these free apps that's just my personal observation i don't have any science on this this is very anecdotal and i'm not sure what the actual quantifiable difference is but it's just something i notice also one other thing i really like in interactive brokers that i wanted to mention is the reporting you can get any report you can get bring up any data about your account about the stuff you've been doing you want anything you can get a detailed summary of all your fees the trades whatever you want in almost any format split by whatever this is particularly useful when it comes to submitting your tax returns because you get all of that data in one place in a neat table with all the different numbers that you need and it is super accessible you don't need to go and build your own excel spreadsheet it is a little clunky you have to click around to understand what these different reports are how they work but once you get used to it it is really quite good the amount information is way more than any of these other free apps that i've used and that about wraps it up i if you found this review useful please don't forget to smash the like button for the youtube algorithm thank you so much for watching i really appreciate it and as always i'll see you guys later [Music] you

Channel: Sasha Yanshin

Views: 14,157

Keywords: interactive brokers, interactive brokers review, interactive brokers review 2021, interactive brokers review uk, interactive brokers review australia, interactive brokers review singapore, interactive brokers review india, interactive brokers review europe, ibkr, ibkr review, ibkr review singapore, ibkr review uk, ibkr pro review, interactive brokers pro, interactive brokers vs etoro, best investing apps 2021, best investing platform 2021

Id: iJkytMiAuN0

Length: 19min 54sec (1194 seconds)

Published: Wed Oct 27 2021