Step-by-Step Guide: How to Easily Buy an ETF on Interactive Brokers
| Updated: |(Disclosure: Some of the links below may be affiliate links)
I have been using Interactive Brokers (IB) for several years. It took me a while to get used to this broker. However, I can now do all the operations I need easily. I will show you how to buy an ETF from start to finish on IB, the easy way!
Many readers were having a hard time starting with Interactive Brokers. It may be a little complicated initially, but it becomes straightforward once you do it. If you follow this guide, you will know how to buy ETFs from IB without issue!
This guide will show you how to buy an ETF directly from the account management interface. And we also see how to deposit money into your account from this interface and even how to convert currencies if necessary. So, we will cover all the steps to make your first investment with Interactive Brokers!
By the end of the guide, you will know exactly how to buy ETFs on IB!
Interactive Brokers Interfaces
The broker you need to buy stocks and ETFs reliably and at extremely affordable prices. Trade U.S. stocks for as little as 0.5 USD!
- Extremely affordable
- Wide range of investing instruments
Interactive Brokers has several different user interfaces:
- Account Management
- Web Trader
- IBKR Mobile
- Trading Workstation (TWS)
- IBKR Desktop
This guide will show you how to buy an ETF from the Account Management interface. This interface is the simplest of all the interfaces. And this interface has all the features you need to buy your first ETF from Interactive Brokers. I have a guide on the different IB interfaces if you want to learn more. But do not worry, you only need one!
This guide will review 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, the process is the same for any ETF. For instance, I follow the same monthly steps to buy VT (my favorite ETF) and CHSPI (my Swiss ETF).
I will guide you through all the steps. The process starts with transferring the money to IB, converting it to USD, and 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.
I assume that you already have an Interactive Brokers account. If you do not have one, you can read my guide on opening an Interactive Brokers account. And then, you can come back once you have created your account!
Usually, there should not be differences between the entities, but I recommend using the IB UK entity for Swiss investors.
The Best Interactive Brokers interface
The Account Management interface is the default interface of Interactive Brokers. This interface allows you to do everything you need:
- You can visualize your portfolio and see your investing performance.
- You can do basic trading. However, some of the advanced options for trading are not available from this interface (but we do not need them anyway).
- You can request a transfer of funds.
- You can generate reports of your activity or results.
This interface is excellent for most tasks. This interface is the only one I use for investing with Interactive Brokers. You should not fall into the trap of using a more complicated interface to do simple tasks.
To open this interface, you can go to the Interactive Brokers website. From there, you can click on the red Login button.
Go to the Client Portal Login or the Account Management link to access Account Management. They both do the same thing. 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 to Interactive Brokers
If you do not have enough money to make the trade you want, you must first fund your account. For example, you want to transfer 5000 CHF to your IB account.
There are two steps in this process:
- First, create a new deposit method.
- Then, declare an incoming transfer from a deposit method.
The first step is only necessary if you have never made a transfer from this source. If you already did it, you can skip it. We should see how to do both of the steps.
1. Create a new deposit method
On Interactive Brokers, you must first declare the transfer’s source.
It is only necessary to do this once for each source. You can have many sources in many different currencies. However, the source of the deposit must be an account in your name. But it does not have to be in the same currency as your account currency. This is highly convenient to fund your account from different sources.
To access this view, go to Menu > Transfer & Pay > Transfer Funds. If you want to declare a new source, click on How to wire Funds. Then, you must fill in some information about this deposit method.
Make sure to double-check all the information. IB will use this information to associate the incoming funds to your account. If something does not match, the fund transfer may be delayed.
2. Declare a new wire transfer
Once you have created your deposit method, you must declare a new transfer from this method. You will have to do that every time you do a transfer.
Return to the Transfer Funds view and select one of the deposit methods. You should have one for each bank account from which you plan to send money to IB.
Once you have set the correct amount you intend to transfer (5’000 CHF in my example), you can continue, and Interactive Brokers will give you all the information for the bank transfer.
This view 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 message should contain your account number and your name.
This information is what Interactive Brokers will use to identify the transfer. If you do not use the correct information, the transfer may take a while to be processed and returned to your bank account.
You can then initiate the transfer from your bank. If you transfer CHF, use the CH IBAN (IB should present it by default). That way, the transfer will be entirely free. Once you initiate the transfer, reaching IB may take a few days. But, generally, it is pretty fast. When my bank executes the transfer, I usually see the money in my IB account the same day.
You may be assigned another IBAN (from Credit Suisse) to wire money to your account, depending on when you created your account. This other IBAN is also a CH IBAN you can transfer to without fees. In this case, follow the instructions given to you by IB.
Convert currency from Account Management
Since April 2024, you do not have to convert currency directly. Indeed, if you have a cash account, IB will automatically buy the currency you need from your base currency. If you want a little more control, you can do the conversion yourself.
If you plan to buy an ETF in another currency, you will first have to buy this currency. It is straightforward to do so from the account management interface.
You can go into the menu and click on Convert Currency.
In this view, you can choose which currency you want to convert and into which currency. Next, enter the amount you want to convert and click Submit. Interactive Brokers will then generate an order for you on the forex market. And once this order is executed (generally instantly), you will get your USD.
If you want more control, there is another way to convert currency. You can buy currency like you buy shares (see next section). For instance, you can purchase shares in USD.CHF, which means buying some USD with some 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!
This method will give you more options. But in most cases, the simple conversion will work nicely. I only use the default currency conversion method since it is simpler and saves time.
Buy an ETF on Interactive Brokers
Once you have enough cash in the correct currency, you can buy some VOO ETF shares (or any other ETF). You can use the search function 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 propose several options (Stock, Futures, Options, and Contracts For Difference (CFD)). ETFs are listed as Stock. And sometimes, you will also see several exchanges. Here, we want the Stock on the ARCA exchange.
If all these values confuse you, do not worry! Here is what they mean:
- 266.42 is the current market price.
- -0.06 is the last change of the market price in absolute value.
- -0.02% is the last change of the market price in percent.
- In red, you will find the ask volume and the ask price (266.70)
- In blue, you will find the bid volume and the bid price (265.36)
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. If you are a passive investor like me, you only need to worry about the current price. You can ignore all the other information.
Then, you can set the amount you want and the Limit price. Since it is a trade, you can use several order types: Market, Limit, Stop, and Stop Limit. If you are trading with a popular ETF, you can use a Market order.
The execution on IB is good enough that you will not have issues with market orders. Otherwise, you can use Limit Orders. You can set the Limit price based on the current data. But be careful about not trying to optimize too much.
I only use Market Orders. They are simple and not nearly as inefficient as some people think.
You can also set the duration of the order. Either the order is valid only today or Good Till Cancel (GTC). If you want to learn more about these options, I wrote an entire article about stock market order types.
I would advise using the Preview option to ensure you want this operation.
This view will give you all the information you want about the order. You need to pay special attention to the amount and the commission.
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 (yes, IB is that cheap!). Once satisfied with your order, click Submit to validate it and wait for it to be executed.
If you use a market order and the stock exchange is open, IB will instantly execute. IB will execute a limit order based on the price you set. If you set a price higher than the current price, it will also be executed instantly.
Congratulations, you now have shares of your ETF! You can follow this simple every month and be on your way to using the stock market for great returns!
Warnings from Interactive Brokers
When you trade with IB from the Account Management interface, you may encounter several warning popups on your screen. You will get used to it. But when you are starting to invest, it can be overwhelming. So, here is what the biggest warnings mean.
And do not forget to click the check box to avoid seeing them again!
Warning about small currency transactions
The first warning 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 use IDEALPRO and FXCONV instead. You do not need to worry about that! They are just two different routing systems.
For orders below 25’000 CHF, IB will not guarantee interbank exchange rates. So, you may be getting a slightly worse deal. But the difference is negligible enough that you do not have to worry about it. I have converted many times small amounts with IB without any issues.
Warning about lack of real-time data
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. Passive investors do not need real-time pricing! The prices you see in the interface are delayed by 15 minutes. If you need real-time data, you can always look at Google Finance to see them.
So once again, do not worry about this warning.
Warning about price caps
The third warning is about mandatory price caps. This warning is probably the least obvious of the three.
In 2016, Interactive Brokers started implementing price caps for market orders. It means that a limit order with a price significantly different from the market price cannot be executed even though it would be valid otherwise. IB uses its way of setting price caps to decide what is fair and what is not.
For instance, if a stock trades at a market price of 100 USD and you open a buy limit order at 50 USD, IB will not take this limit order into account to execute against other market orders.
Thus, using price caps on market orders is simply a protection for investors using market orders. This protection is good for honest investors like you and me.
Once again, you can safely ignore this warning.
FAQ
How much does it cost to convert currency on IB?
Converting currency on IB will cost you 2 USD, regardless of the amount. For medium to considerable amounts, this is very cheap. But you should avoid converting tiny amounts.
Are the fees the same for each IB interface?
Yes. There are multiple ways to trade with IB, but the fees are the same on each of them.
Conclusion
The broker you need to buy stocks and ETFs reliably and at extremely affordable prices. Trade U.S. stocks for as little as 0.5 USD!
- Extremely affordable
- Wide range of investing instruments
Now, you are already done! You will now have more shares of the VOO ETF (or any other ETF you want to buy). The entire process is the same for any other ETF. You have to change the name you are searching for, and if it is available in Interactive Brokers, you can buy it.
It is straightforward to trade from the Account Management interface. You can do all the basic investing tasks from this interface. Likely, 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.
Of course, there are a few limitations. For instance, some Interactive Brokers order types are not available. But that is not an issue for simple passive investors. The account management interface is the only one I use, and I never found anything missing. I invest every month using this interface.
For beginners with Interactive Brokers, I 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.
To streamline your investing, you may consider automating your investments with Interactive Brokers. With that technique, you will have almost nothing to do to invest each month.
If you prefer trading from your mobile, you can buy ETFs from the IBKR Mobile Application. Or, if you need additional information on this broker, read my review of Interactive Brokers.
Do you have any questions on how to use IB? Do you have any tips for the Account Management interface?
Recommended reading
- More articles about Best Brokers
- More articles about Investing
- Interactive Brokers Review 2024: Pros & Cons
- Swissquote vs Interactive Brokers 2024
- Saxo Bank Review 2024 – Pros & Cons
Learn easy ways to optimize your finances and save thousands in Switzerland with our exclusive e-book. Learn about the most cost-effective financial services tailored for savvy residents and expats!
Get Your FREE Swiss Money-Saving Guide
I tried to set up my recurring investment with IBKR of 500USD per month starting from 11th Sep 2024, but my investment didn’t go through on the first day. I would need some help and advise.
I can think of two things:
* Do you have the necessary account permissions for this position?
* Did your cash already settle?
Dear Baptiste, thank you very much for the great work you are doing! Your blog is very informative and helpful. I have a basic question about IKBR. I have transferred money to my new IKBR account and now tried to invest in an ETF. I am a beginner and a bit overwhelmed by all the choices. For example, I am looking for the SPDR MSCI World UCITS ETF (IE00BFY0GT14). I get 3 options listed called SPDR MSCI World VALUE UCITS, I guess it is one of them. But how do I find out the difference between the three? Is it only currency? And if so, which one would you recommend to choose, EUR, GBP or USD (account is in CHF)? In general, is there no way to search for the ISIN or to see the ISIN somewhere (to make sure to not choose the wrong ETF)?
As you wrote, it will take some time to understand the user interface… :)
Thank you in advance for your reply.
Hi Kerstin,
Thanks for your kind words :)
* If you are Swiss, you can use US ETFs, which are easier since there are fewer variants.
* There are two differences: stock exchange and trading currency. Generally, I recommend using the same currency as the fund is holding (USD in this case). And using the stock exchange with the highest volume (LSE in this case).
ISIN does not help because these are all the same fund, but different stock exchanges. It will not make much of a difference on IB since fees are good. The difference will be in the spread, but as long as you are trading highly liquid ETFs (and avoiding small stock exchanges), you should be fine.
Thanks for your quick reply, very much appreciated. I will look into getting an US ETF instead, also read some of your other articles related to that in the meantime. Great content!
If you don’t mind another question: I was thinking about investing in the Switzerland Dividend Stocks (iShares Swiss Dividend, CHDVD). Now I have seen that you got rid of this ETF in your portfolio in favor of the CHSPI. Is there a specific reason for that? Is it to be more diversified? However, performance of the CHDVD has been better in the past (despite the slightly higher cost)… Thank you!
CHDVD is a good ETF. I got rid of it to slightly improve my diversification and to stop focusing on dividends which are not that efficient in Switzerland. But it’s true that CHDVD performance is excellent. You cannot really wrong with either.
Hi Baptiste, thank your for your recommendations. So far I have 30% in stocks and 70% in cash- I am a bit hesitant to buy more stocks at this stake (looming crash) but would consider to buy some bonds (60-40 rule). I do not know anything about bonds – do you have any fixed income ETF available on IB that you would recommend?
Hi Mike,
Buying CH bonds is quite limited. I would personally buy the iShares Swiss Domestic Government Bond 7-15 ETF (CSBGC0). But there are not many good options. You can also look at what your local bank is offering.
Hi, I didn’t mean Swiss but any bonds – world/ USA. Same problem for me as stock ETFs/ there are so many out there. So I thought you have some insights
My thoughts are generally to avoid non-CH bonds. Bonds are for reducing volatility. If you use non-CH bonds, you will add a currency exchange risk on top of the bonds and this will defeat their purpose in my opinion.
I was going to transfer my first money to my IB account but saw in the transfer instructions that it would be wired to Interactive Brokers in the US, not United Kingdom. Does that make a difference?
Oh, I think I see. It also says US in your screenshot but it says a UK bank with a CH IBAN, whereas mine is to UBS?
If you have a CH IBAN, you should be good. IB has multiple CH IBAN (at least 3 that I know of) and different IBAN may be shown to different customers.
HI Someone,
Normally, the funds are wired to London, but the bank title is in the US.
Are you using IB UK? Did they give you a CH IBAN?
Hello,
I need some support to fix a problem I am facing in IB. I am trying to buy a ETF (IUSQISHARES MSCI ACWI), but once I try to buy this message is popping up:
“does not have permissions to trade this contract. You can request permissions in account settings.”
I have the trading permission for Stocks (Italy, Central Europe and USA). Should I ask for something else?
Thank you for your help.
Alessio
Hi Alessio
The domicile of this ETF is Ireland. So I believe you should be good with central europe.
However, the message indicates a contract. You should make sure that you are trying to buy the ETF (stock) and not a derivative on this ETF.
Hello Baptiste,
I’ve closed my positions with the bank, and opened an IBKR account.
As I need to reinvest a quite large sum (>50k) I was wondering what would be the best strategy to place orders on IBKR.
I understand buying at market price would work best for modest amounts (eg 1k-2k), but if I need to reinvest larger amounts what should be the reccommended way to proceed? shall I still distribute the investements over time, or use different market order types (e.g. limit or trailing stop?) to quickly reinvest the initial sum, before committing to monthly orders?
thank you!
Hi Andrea
Mathematically, the best way is to invest everything at once now. But it’s more difficult to do it mentally.
It also depends on how long term is your goal.
You can read this article where I talk about this: Dollar Cost Averaging is more risky than you think
Hello Baptiste,
many thanks for pointing me to that article. it was extremely informative.
based on the information you wrote, do I understand correclty that even if I want to invest a lump sum should I still chose to buy at market price?
I was reading about limit orders, and wondered if using this strategy for a lump sum would make sense, although I understand this is also a form market timing.
I was considering this scenario: if I use the current market price, and place a limit order to buy at 1-2% less than that price, the amount of money that I “save” might be close to the amount I could regularly invest every month.
For ETF like VT; I have no idea if 1-2% fluctuations do make sense or are realistic in the short term (e.g. during the course of a day or a week)
also, I understand that limit orders might not be fully executed, as they depend on the availability of shares at a given price, so the lump sum might invested over a longer time period.
considering I am aiming for the long term, would this be worth the effort?
thanks again!
Hi Andrea
The strategy your describe is pure market timing. It may take a hour to lower by 2% or it might take 2 years or 10. There is just now way of knowing. For me, the only valid way to use a limit order is if you are worried about getting a bad price on an instrument with low trading volume.
If you are aiming for the long-term, 1 or 2% now will not matter at all. Invest the entire sum with a market order you are using an instrument such as VT or with a limit order at or above the market price.
Of course, this is only my strategy, you may want to do something else :)
Hello,
Is it possible to buy an ETF that is denominated in USD while having only CHF in my account? If so, if I buy the ETF (VT, for example) with CHF, do I avoid paying the 2 CHF fee for the currency exchange?
Thank you in advance.
Hi Maciej
Yes, it’s possible, but not for free. If you do conversions below 6500 CHF, it is cheaper to let IB do the conversion for you.
You can check out the details here: currency conversions fee at IB
Hello Baptiste! Thanks for the work you are doing with your blog, it is truly inspiring. As a person that was ZERO interested in money or investing, I’ve discovered your blog when I moved to Switzerland and had the typical expat doubts as bank accounts, third pillar… And after reading many of your articles, I found myself also investing in IB :D
I have a basic question regarding the currency exchange: I understand you do first the conversion CHF:USD with a 2fr charge and then buy the USD EFT. I’ve tried and no problem.
But I’ve also tried to buy an small amount of USD ETF directly with CHF (without having available USD), and from what I can see, IB did directly the conversion without any charge. Is there anything I’m missing? I’ve read in Reddit that in those cases what happens is that you “loan” the USD and have a debt, but I don’t see any “debt” in my activity. Another user in Reddit mentioned that it is an option and there are no exchange fees, and that I’m struggling to believe it.
Do you think it is an option to buy directly in another currency?
Thanks and regards!
Hi Meux
Thanks for your kind words :) I am glad I got you interested in investing!
Excellent question. Since last month, IB can do the currency conversion automatically. If you look in this section, you will see a paragraph about that.
Interestingly, the fee for automated conversions are cheaper for conversions below 6500 CHF.
As for the two explanations, the first one is correct but only if you have a margin account and the second one is incorrect as far as I know (no such option).
Hi Baptiste
Thank you for your comprehensive guide.
I have transferred CHF 100.- into my IKBR account and used it to buy VOO just like in your example. When choosing the amount I had to choose USD and simply chose 100 since I did not now how many USD my CHF 100.- would be.
The ETF is now in my portfolio but I have CHF 8.- left in my IKBR cash account.
My question is, is there a way to utilize the whole cash amount for a specific purchase or even better see how many shares I could buy with my cash reserves?
Especially if I want to do some automated recurring investments, it would be a pity if some CHF is just left in the IKBR cash account.
Thanks in advance for your help!
Hi Riddler
100 USD is about 92 CHF, so it makes sense that you have 8 CHF left in your account.
If you want to know exactly how much you buy, you should either convert in your head the amount of CHF to USD and use that amount (minus the fees) or convert the CHF to USD for real so IB can tell how much you can buy.
Even if you have little CHF left in the account, it really not the end of the world. But with CHF and USD, it is indeed difficult to automate everything since the conversion rate varies.
Hi Baptiste,
Many thanks for this article and for creating thepoorswiss blog. It has been immensely helpful.
My question is regarding currency and stock exchanges for the same fund –
If I am considering investing in an ETF domiciled in Ireland specifically – (iShares Core S&P 500 UCITS ETF (Acc))
– This ETF is listed on a few stock exchanges and in a combination of different currencies
– ex: LONDON/USD
LONDON/GBP
Euronext Amsterdam/EUR
– Do you reckon it’s better to buy this ETF in LONDON/USD as it’s mostly the US stocks?
Also, note that all my existing investments were traded in EUR and on the Euronext Amsterdam exchange. I usually convert my CHF to EUR for trading purposes.
Secondly, Do you think holding multiple currencies in an account has any disadvantages?
Many thanks !!
Thanks, Minal.
I generally recommend buying it in the same currency as the fund holds (USD in your case). Then, where you buy it makes little difference, but you want a cheap exchange, ideally one with a large volume (to avoid spread).
In your case, London / USD works well. Even if you choose EUR, it will still hold USD, and your EUR will be converted behind the scenes.
I think there is no problem holding multiple currencies in the same account.