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Interactive Brokers recently introduced a new feature to automate your investments: Recurring investments. Many people have been waiting for this feature for a long time.
Indeed, many people want to automate their investments as much as possible. And this was not possible before with Interactive Brokers. But now everything changed. You can entirely automate your investments!
So, we will see exactly how to automate your investments with Interactive Brokers and what that means.
IBKR Recurring Investments
Until recently, you had to make all trades by hand with Interactive Brokers (IB). I do not think this is a big deal since I make all my trades directly on the interface, and it is only a few minutes a month. However, many people want an extra level of automation.
As of December 2022, automated investments are now possible. Indeed, IB introduced a new feature called Recurring Investments. This feature lets the user configure some investments that happen at regular intervals.
For instance, you could configure IB to invest 5000 USD in Vanguard Total World ETF (VT) monthly and 1000 CHF in Nestlé every two months.
You can use this feature with US and European stocks and ETFs. However, you can only use this feature on stocks that allow fractional trading. Indeed, the IBKR Recurring Investments feature is based on fractional trading.
Fractional trading allows users to buy a fraction of a share instead of a full share. This is important for the recurring investments feature to work. So, you must first get permission to trade fractional stocks (in your account settings) before using recurring investments.
For your automated investment, you can select different schedules, and IB will choose the proper day based on your start date and schedule. Currently, it is possible to use these schedules:
The monthly recurring investment will make the most sense for most European people. In the US, people are paid twice a month, so a biweekly frequency makes sense.
Similar orders from all customers using this feature will be grouped and executed. This is done through Volume-Weighted Average Price (VWAP) orders. This is a special order type on IB. It is not important to know the details, but it is essential to know that All users with recurring investments in the same stock or ETF on the same day receive the same average price.
If the order starts on a day when the market is closed, the order will start the next open day.
It is also interesting to know that if you do not have the currency necessary for the trade, IB will convert the currency automatically. The documentation is not entirely clear as to how this will be performed. But I trust IB will use a similar kind of order on the Forex market and that execution will be suitable.
It is important to note that recurring investments use the fixed pricing scheme of IB. Indeed, IB has two pricing schemes, Fixed and Tiered.
So, for US stocks and ETFs, for instance, you will pay the lesser of 1 USD or 1% trade value on most trades. If you buy more than 200 shares at once, you will have to pay 0.005 USD per share, which is unlikely.
So, overall, fees will be extremely cheap and similar to what you are used to paying on your standard investments.
So, without further ado, here is how to automate your investments with IB.
Automate your investments with IB
If you already have an account, you can start automating your investments now. If you do not, you must first create an Interactive Brokers account.
Now that we know everything we need, it is time to learn how to automate your investments with IB! The new feature is available from the menu under Trade.
If that is your first use of this feature, you should arrive on a mostly empty page. Otherwise, you will see a list of your current recurring investments. From there, you can click the “Create Recurring Investment” button, and you will be able to create your first recurring investment.
First, you must search for the investment you want to automate. For instance, if you want to automate your investments in VT, you can put VT in Symbol and press Search. This is simple.
On the next screen, you can configure your recurring investment. First, you will need to select the start and end date. You can set them very far apart if you want to keep that recurring investments for a long time. In my example, I have set up one year.
Then, you can choose the amount. You cannot choose the currency because this is fixed based on the asset you have selected in the previous step. If you had chosen a Swiss share like UBS, you would have seen CHF on the second screen.
Finally, you can choose the interval. In my example, I have chosen monthly, but you can choose whatever you want.
Once you are ready, press Continue, and you will get an overview of the investment before finalization.
On this, you will get some disclosure information. You should read it at least once on your first recurring investment. Then, on the right part, you will get a summary of your automated investment.
For instance, for my example, we can see a monthly investment of 1000 USD in VT. Over one year, this will cost me 12’000 USD.
You should double-check all this data. Once you have checked everything, press “Save Investment,” and your recurring investment will become active.
Your recurring investment is now active! By this time, you have successfully automated your investments on IB! On the next screen, you can see the new active recurring investment.
From here, you can update your recurring investments if you want. And you can start adding more if your portfolio has more than one position.
And this is already the end of the process. The process is very simple and was made to help you automate your investments in the simplest way possible.
Automate your deposits with IB
If you want to automate your investments, you must also automate your deposits. Fortunately, automating your deposits with IB for a long time has been possible.
First, you can access the proper view from the menu Transfer & Pay and then Transfer Funds.
Then, you can choose “Make a Deposit”, as you would normally do a standard (non-recurring) deposit.
Then, you will need to choose a deposit method. Here, I only have my Migros bank account as a source. If you have not set up one, read my guide on investing with IB. It will help you.
Finally, this view is where you can set up the deposit as recurring. Just check the box “Make this a recurring transaction?” and your deposit will be set to recurring. You can then choose the frequency, start date, and end date, similar to automated investments.
Once you have configured everything, you can click on “Get Transfer Instructions” and this will take you to a confirmation page.
You must confirm your recurring deposit with your password and second authentication factor. Make sure you double-check the information before your click on Save.
Congratulations, you have now successfully set up an automated deposit on IB. You only have to automate it on your bank side, ensuring you are using the proper information in the message so that IB can identify you.
With these two parts (automated investments and recurring deposits), you can fully automate your investments!
It is now possible to automate your investments with Interactive Brokers! Many investors will be very happy with this feature. I have often been asked whether automated investments were possible, and now I can finally answer yes!
I do not plan on automating my investments. I do not think this is useful since this makes people too complacent. Nevertheless, it is much better to automate your investments than not invest! And I know that many people disagree with me. Therefore, if this feature helps you invest, it is a great feature!
What about you? What do you think about this feature?
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