(Disclosure: Some of the links below may be affiliate links. For more information, read my disclosure.)
I have recently started using Interactive Brokers (IB). It took a while for me to get used to this system. I discovered that Interactive Brokers has many interfaces from which you can trade. It is really overwhelming at first. I have been contacted a few times by readers that were having a hard time starting with Interactive Brokers. And unfortunately, I did not have any good resource on the subject to help them. Moreover, many people do not know that the Account Management interface can be used for most tasks.
This is why I plan to make a few posts explaining some basic features of Interactive Brokers. The idea is to help everyone that is starting with Interactive Brokers to do the basic tasks in each interface. I will try to cover funding the account, converting currencies and buy and selling shares for each of the posts.
In this post, I am going to go over how to buy the VOO (Vanguard S&P 500) ETF from the Account Management interface. Even though my example will focus on the VOO ETF, it is the same for any ETF. We are going to go over all the steps. The process starts with transferring the money to IB, then converting it to USD and then finally buying the ETF. Of course, if your base currency is USD, you do not need step 2. And if your account is already funded, you do not need the first step either.
For this, I am going to assume that you have an Interactive Brokers account. If you do not have one yet, you can read how to open an Interactive Brokers account.
Account Management Interface
The Account Management interface is the default interface of Interactive Brokers (IB). I talked at length about the different interfaces of IB. This interface allows you to do almost everything:
- You can visualize your portfolio and see your investing performance.
- You can do basic trading. Some of the advanced options for trading are not available from this interface.
- You can request a transfer of funds.
- You can generate reports of your activity or results.
I believe this interface is really good for most tasks. And this is the one I am using the most since it is also the simplest of them all to use.
To open this interface, you can go to the Interactive Brokers website. From there, you can click on the red Log In button.
To access Account Management, you can either go to the Client Portal Login or use the Account Management link. You will need to enter your account name and password. And you will also need to use your phone for two-factor authentication.
Transferring money from Account Management
If you do not have enough money to do the trade you want, you will first have to fund your account. For this, Account Management is the best interface. Let’s say you want to transfer 5000 CHF on your IB account.
There are two steps in this process:
- Create a new deposit method.
- Declare an incoming transfer from a deposit method.
The first step is only necessary if you never made a transfer from this source. If you already did it, you can skip it. Let’s see how to do both of the steps.
1. Create a new deposit method
On Interactive Brokers, you need to declare first the source of the transfer. This is only necessary to do this once for each source. You can have many sources in many different currencies. It does not have to be in the same currency as your account currency.
You can to Menu > Transfer & Pay > Transfer Funds to access this view. If you want to declare a new source, you can click on How to wire Funds. Then, you will have to fill some information about this deposit method.
Make sure to double check all the information. This will be used to associate the incoming funds to your account. If something does not match, the fund transfer may be delayed.
2. Declare new wire transfer
Once you have created your deposit method, you will need to declare a new transfer from this method. This will be necessary every time you do a transfer.
Go back to the Transfer Funds view and select one of the deposit methods. You should have one of them for each bank account from which you are planning to send money to IB.
Once you have set the correct amount you intend to transfer, here 5000 CHF, you can continue and Interactive Brokers will give you all the information for the bank transfer.
This should give you all the necessary information to perform the wire transfer from your bank. Be careful about setting the correct message to the recipient. This should contain your account number and your name. This is what Interactive Brokers will use to identify the transfer as going to your account.
You can then initiate the transfer from your bank. If you transfer CHF, make sure to use the CH IBAN. That way, the transfer will be entirely free. Once the transfer is initiated, it may take a few days to reach IB. Generally, it is quite fast. As soon as the transfer is executed by my bank, I generally see the money on my IB account the same day.
Convert currency from Account Management
If you plan to buy an ETF that is not in your base currency, you will first have to buy this currency. Contrary to other brokers, you do not have an option to simply convert the currency. As we will see, this is done in a similar way to trading stocks. On the other hand, it is very cheap to convert currencies on Interactive Brokers.
For the sake of the example, let’s assume you want to convert your CHF into 5000 USD. You can start by pressing the trade button on the top right of the page.
This should pop up this interface:
If all these values confuse you, do not worry! They are actually making sense:
- 1.00265 is the current market price.
- +0.00015 is the last change of the market price in absolute value.
- 0.01% is the last change of the market price in percent.
- In red, you will find the ask volume (500K) and the ask price (1.00321)
- In blue, you will find the bid volume (1M) and the bid price (1.00208)
And the fact that it is written Frozen Data is because I did not pay to get real time data for this particular market. Or it could also mean that I am trading out of hours.
From there, you can search for USD.CHF. This is the name of what you want to buy. It means you are going to buy USD with CHF. If you want to buy USD with EUR, you can look for USD.EUR. If you want to buy EUR with USD, you can trade for EUR.USD. You get the idea!
Then, you can set the amount you want as well as the Limit price. Since it is a trade, you can use several order types: Market, Limit, Stop and Stop Limit. I recommend only using Limit Orders. You can set the Limit price based on the current data. You can also set the duration of the order. Either the order is valid only today or it is Good Till Cancel (GTC). If you want to learn more about these options, I wrote an entire article about stock market order types.
Once you are sure of what you want, you can either click on Preview to view how much you are going to pay or directly click on Submit Buy Order to send the order to IB. Once it is submitted, you just have to way until it is executed and you can use your newly converted cash. Unless you put a Limit that is very different from the market price, this should be executed very quickly.
Buy an ETF from Account Management
Once you have enough cash in the correct currency, you can now buy some shares of the VOO ETF. If you followed the previous section, you will already be familiar as to how to do it. It is exactly the same process! You can open the Trade window by using the Trade button from the top right of the interface.
You can type VOO, or the name of any other ETF you wish to buy shares from, and type Enter. Interactive Brokers will probably propose several options (Stock, Futures, Options, and Contracts For Difference (CFD)). And sometimes, you will also see several exchanges. Here, we want the Stock on the ARCA exchange.
All the numbers visible on this view follow the same logic as for the currency conversion.
You can set the limit price for buying the ETF and the number of shares you want. You can also use other order types, but Limit is generally what you want. I would advise you to use the Preview option to then make sure this is what you want.
This will give you all the information you want about the order. You need to pay special attention to the amount and the commission. Here, for instance, I would have paid 5328.60 USD for the purchase of 20 shares and I would have only paid fees between 0.31 and 0.41 USD. Once you are satisfied with your order, you can Submit it and wait for it to be executed.
Warnings from Interactive Brokers
When you trade with IB from the Account Management interface, you may encounter several warnings popups on your screen.
The first is when you do a small currency transaction, below 25’000 CHF. In that case, IB will tell you that the order is too small to be using IDEALPRO and will use FXCONV instead. You do not need to worry about that! They are just two different routing system. You may have a very slight difference in market price between both. But I have never seen a significant difference. And FXCONV will create some virtual positions for you in your portfolios. But they can be safely ignored. So it does not matter which system you use!
The second warning that could pop up is when you buy an ETF without real-time data. If you are like me, you will not have paid the monthly fee to get real-time prices. If I need them, I can always look at Google Finance to see them. You should not worry about that warning. It just means that the prices you are seeing in the interface are delayed by 15 minutes. If you use Limit Orders as your stock market order type, you will be fine regardless.
Now, you are already done! You will now have more shares of the VOO ETF. The entire process is exactly the same for any other ETF. You just have to change the name you are searching for and if it is available in IB, you will be able to buy it as well. In fact, it is really simple to trade from the Account Management interface. You can do all the basic investing tasks from this interface. It is likely that most simple investors will never need any other interface.
As you can see, you can do much from the Account Management interface. Even though its name talks only about managing your account, it can do much more than that! You can do most things on this interface. There are a few limitations. For instance, some of the Interactive Brokers order types are not available. But most of the time, the only type of order you need is a Limit order. So that should not be an issue.
For beginners with Interactive Brokers, I really recommend using the Account Management interface. Once you are more familiar with it, and if you are interested, you can start exploring the other interfaces. But you can go your whole investing life only using this single interface.
Do you have any question on how to use IB? Do you have any tip for the Account Management interface?