Interactive Brokers - How to Buy ETFs (European investor)

Summary

In this video, Tom Crosshill demonstrates how to invest €1,000 in ETFs using Interactive Brokers, a popular but complex brokerage platform. He explains the various platforms available, including the client portal, mobile app, and desktop app, highlighting their pros and cons. Tom shares his experience with buying ETFs, the challenges with Interactive Brokers’ interface, and tips on setting up an order with limit prices for better execution. He also touches on features like currency conversion and account management, offering insights into why experienced investors choose this brokerage despite its clunky design.

Takeaways

• 😀 Interactive Brokers offers seven different platforms, which can be overwhelming for beginners.
• 😀 The most useful platform for ETF purchases is the Client Portal, which offers a simple web interface.
• 😀 Interactive Brokers has some of the lowest currency conversion fees, making it a good choice for those needing to convert currencies.
• 😀 ETFs like SPY and QQQ are not available in most European countries due to EU regulations, but there are many European-based ETFs available.
• 😀 Finding specific ETFs on Interactive Brokers can be challenging due to confusing symbols and non-intuitive search features.
• 😀 The best way to search for ETFs on Interactive Brokers is to use the IB Contract Information Center, not the Client Portal's search bar.
• 😀 Interactive Brokers allows fractional ETF shares, so you can invest in smaller amounts (like €1,000 in an ETF).
• 😀 When placing an ETF order, it's better to use a limit order instead of a market order to avoid unexpected price fluctuations.
• 😀 The order placement process in Interactive Brokers can be clunky but becomes easier with experience.
• 😀 Interactive Brokers provides detailed performance and reports, but finding them requires navigating through a lot of menus.
• 😀 To invest in ETFs, ensure you have the correct trading permissions for the countries where the stock exchanges are located.

Q & A

What is the main problem with Interactive Brokers for beginners?

The main problem is that Interactive Brokers has a clunky and complicated user interface, which can be overwhelming, especially for beginners.

How many platforms does Interactive Brokers offer?

Interactive Brokers offers seven different platforms, including IBKR Global Trader, Client Portal, IBKR Desktop, IBKR Mobile, Trader Workstation, IBKR APIs, and IBKR Impact.

Which platform does Tom Crosshill use for buying ETFs in the demonstration?

Tom Crosshill uses the Client Portal for buying ETFs, as it is simple and useful for basic ETF purchases.

Why is the Client Portal considered useful for ETF investments?

The Client Portal is considered useful because it provides a straightforward way to track portfolio performance, manage investments, and buy ETFs without too much complexity.

What are the key steps involved in funding an account with Interactive Brokers?

To fund an account, you need to go to 'Transfer and Pay', select 'Transfer Funds', choose or create a deposit method, and then specify the amount you are depositing. It's crucial to notify IBKR with your bank details to ensure the funds are credited properly.

What is the significance of using the ISIN (International Securities Identification Number) when searching for ETFs?

The ISIN is a unique identifier for ETFs and helps ensure that the correct ETF is selected. This is especially useful on Interactive Brokers, where searching by ETF name can sometimes yield confusing results.

What is 'smart routing' in Interactive Brokers, and how does it work?

Smart routing is a feature that automatically selects the best price for an ETF by routing the order through multiple exchanges, ensuring the most favorable price for the investor.

What type of order does Tom Crosshill recommend for buying ETFs and why?

Tom recommends using a Limit order instead of a Market order because it allows for more control over the price at which the ETF is bought, reducing the risk of paying an unfavorable price during market disruptions.

What is the advantage of Interactive Brokers' currency conversion feature?

Interactive Brokers offers one of the lowest currency conversion fees, making it a great option for investors who need to convert currencies to invest in ETFs in different currencies, such as Euros or Dollars.

How does Interactive Brokers' reporting and performance section work, and what should users expect?

The reporting and performance section allows users to generate various reports, such as tax documents or account confirmations. However, it can be time-consuming to extract specific data, and users should be prepared for a potentially complex interface.