(Disclosure: Some of the links below may be affiliate links)
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 have many interfaces from which you can trade. It is 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 useful resources on the subject to help them. Moreover, many people do not know that they can use the Account Management interface for most tasks.
Also, this is probably the most simple interface and the most useful one for most investors.
In this article, we are going to see how you can buy an ETF directly from the account management interface. And we are also going to see how to deposit money on your account from this interface.
Interactive Brokers Interfaces
Interactive Brokers is an outstanding broker, with extremely affordable fees! Trade U.S. security for as little as 0.5 USD!
Since many people are confused by the multiple user interfaces of Interactive brokers, I plan to make a few posts explaining some basic features of Interactive Brokers (IB). The idea is to help everyone that is starting with Interactive Brokers to do the necessary 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. 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 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. 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 from Account Management
If you do not have enough money to make 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. It 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. 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 new wire transfer
Once you have created your deposit method, you will need to declare a new transfer from this method. You will have to do that 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 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 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 my bank executes the transfer, I usually 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 convert the currency simply. As we will see, it 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.
Then, you should see this interface:
If all these values confuse you, do not worry! They are 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. The currency pair USD.CHF 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 would already be familiar with how to do it. It is precisely 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 the Limit order is what you generally want. I would advise you to use the Preview option to make sure this is what you want.
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. 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 click on Submit to validate 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 warning popups on your screen. You will get used to it. But when you are starting to invest, it is discouraging.
Warning about small currency transactions
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 systems.
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!
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. 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 see in the interface are delayed by 15 minutes. If you use Limit Orders as your stock market order type, you will be fine regardless.
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 very different from the market price cannot be executed even though it would be valid otherwise. IB is using its own 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, this limit will not be taken into account to execute market orders. Using price caps on market orders is simply a protection for investors using market orders.
Once again, you can safely ignore this warning.
Conclusion
Interactive Brokers is an outstanding broker, with extremely affordable fees! Trade U.S. security for as little as 0.5 USD!
Now, you are already done! You will now have more shares of the VOO ETF. The entire process is the same for any other ETF. You just have to change the name you are searching for, and if it is available in Interactive Brokers, you will be able to buy it as well.
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 of the Interactive Brokers order types are not available. But most of the time, the only kind of order you need is a Limit order. So that should not be an issue.
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.
If you prefer the mobile interface, you can also buy ETFs from the IBKR Mobile Application.
Do you have any questions on how to use IB? Do you have any tips for the Account Management interface?
I guess you’re using tiered pricing? Are there any downsides vs fixed? Doesn’t seem like a much difference though, with fixed you’d pay 1 USD.
Hi Maci,
Yes, I am using the Tiered Pricing. There is no downside for my personal investment situation. However, you need to check for your own investment.
It’s not much indeed, but I am doing about 2 trades a month, that’s about 18 USD saved per year. Not a huge difference, but every little bit helps ;)
I wrote an article about the Tiered Pricing of Interactive Brokers, this may help you!
Thanks for stopping by and welcome!
Hi, I’ve looked at your article and their pricing scheme and I have a hard time to find case when it’s more expensive with tiered pricing, even on lowest tier. Do you have an example maybe?
Hi Maci,
It’s indeed difficult to find good examples of when it would be more expensive. On their website examples, there is one example that is slightly more expensive with Tiered. There are also some examples for other Exchanges (European / Hong Kong), where it is often better to use Fixed. However, for U.S. funds, Tiered seems to be always better for my way of investing.
Thanks for stopping by :)
Hi there. Nice of you to share your experiences for all of us. Much appreciated.
As you must be aware, since December 2019 IB included Fractional Trading on stocks. Do you happen to know if it is available also in Europe on EUR ETFs?
I can’t seem to make it work…
I’m diversifying my portfolio monthly with IWDA + EMIM + IUSN + AGGH and it doesn’t work on either of them…
Thank you for your time!
Hi Marian,
Did you enable the fractional shares option in the configuration in IB? I only remember seeing the option for U.S. shares on my end.
It’s quite possible that they only allow this for the U.S.
But do you really need that?
Thanks for stopping by!
Hi you poor swiss :)
Actually I had a chat with them and it turns out it’s only available for US stocks/etfs.
I did need that because it would make my monthly allocation easier as i could purchase an ETF for a fixed amount of Euro. Given that the stocks differ very much in value i’ll need to kinda rebalance every month.
Anyway, I’ll figure it out somehow! Thanks for the response.
Hi Marian,
What I do to avoid this issue is simply to buy only one ETF each month. I always buy the ETF that needs the most shares to be balanced.
When you have a small portfolio, you will be unbalanced for a while, but it will stabilize a bit more each month.
Thanks for sharing what they said!
Hi Mr. The Poor Swiss,
Thank you for sharing your knowledge. It’s greatly appreciated. I am taking my first steps towards ETF investment using IB, so this post is just a godsend for me.
Let me ask you several questions:
1)”Contrary to other brokers, you do not have an option to simply convert the currency. … On the other hand, it is very cheap to convert currencies on Interactive Brokers.”
How can I caclulate the exact fees for the conversion? Is there any formula? When I tried to buy USD I was given some diapason, for example: commission 2.01 … 2.52 CHF. I find it very weird. Can you imagin the situation when you come to Migros to buy a bottle of orange juce and you see the price: 1.0 – 1.55 CHF. Only at the time when you pay, the cashier decides how much exactly she/he wants to charge you :) Would you like it?
2)”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”.
Looking at the screenshot you provided I can’t find any of the buttons you mentioned:) But it is not a problem. What is real issue for me is all these numbers shown on the picture. I believe that the most important number here is 1.00265 which is what? Is it Bid or Ask? (In WebTrader you can see both: Bid and Ask and easily calculate the spread.) What do all other numbers mean? What is 500K x 1.00321, 1M x 1.00208? What is 0.01% frozen data? I also see +0.00015 in green. Initially I thought that the current exchange rate was recently increased by this amount of money, in other words it was 1.00250 a second ago, but then I realized that it’s not true. So, I am still puzzled what it means. The only thing I am more or less sure about is that the value will be red if it is negative :(
I also noticed that your limit price for the buy order is a little bit lower then the current exchange rate, which means that you want to buy USD for maximum 1.002 CHF while it is currently sold for 1.00265. In this case, I am afraid you might never buy USD if I understand this correctly. If I am not mistaken, it is better to set the limit for a buy order a little bit higher than the current price, i.e. 1.003 in your case, isn’t it?
I also noticed that when an order is created in Account management, the price limit is filled correctly. Several seconds later the exchange rate changes, but the limit stays the same. In WebTrader for example, you’ll see the Limit Price changing while you fill other fields of the order. This is good because it sticks with the current exchange rate.
3) I tried my first conversion from CHF to USD. I transfered 100 CHF to my IB account to test the system. I decided to buy 96 USD. The exchange rate was: 1,00769, so I spent 96,73824 CHF. When I was previewing my order I saw several popups. The first one was very confusing:
“Important Note: Your order size is below the USD 25000 IdealPro minimum. You may cancel and increase the order size if you wish to route to IdealPro or select the Transmit button to route as an odd lot order. Note that odd lot orders are not guaranteed executions at the IdealPro displayed quotes.”
What does all this mean? What is IdealPro in particular and why do I need it? Do you usually have your order size above the 25000 USD?Several other pop-ups warned me about risks and other issues.
Now we are coming to the most interesting part. In my portfolio I see the following:
Cash
CHF: 1.24
USD: 96
Total Cash (in CHF): 98.16
This raises so many questions, so I even don’t know where to begin.
As I mentioned already, I had to spend 96,73824 CHF. This means that remaining amount should be 100 – 96,73824 = 3,26176 CHF. Why do I see only 1.24CHF? Does it mean that IB took 2,02176 CHF as a comission for conversion?
How do they calculate the Total cash? If I calculate it, I get a different value: 96 * 1,00769 + 1.24 = 97,97824 CHF.
4) A day after the conversion I received an email from donotreply@interactivebrokers.com :
Dear IBKR Client,
Your Daily Activity Statement and Official Trade Confirmation for May 13, 2019 are now available for account U***XXXX.
Interactive Brokers
The email does not have any attachments. It does not tell where this statement is available. What a useless message! Could you please tell me where I can find this “Daily Activity Statement”?Thank you in advance and I apologize for so many questions.
Hi Aleksei,
1) I think the reason they are displaying it like that is because, before the order is executed they do not know the final value that is converted. However, it is easy to know how you convert.
The fees for converting currencies are 0.20 * 0.0001 * ConvertedValue, with a minimum of 2 USD. So you will basically pay 2 USD unless you convert an immense amount of money at once. If you convert more than one billion USD in a month, you will get better rates, but I guess you are not there yet!
2) Frozen Data means I am not seeing real time prices. This is because I did the screenshot outside of trading hours.
The 0.01% is the last change and the number in green next to the price is also the last change in value.
The number in red on the right is the Ask price and volume
The number in blue on the right is the Bid price and volume
You’re right, in Account Management, the Limit price is set once and not adapted, you have to adapt it yourself.
However, if the Limit price is lower than the market price, it will wait until the limit is reached. If the market only goes up, then it is possible that it will never be filled. However, my Limit was really possible. I was trying to get a little sale on the price of the USD. USD/CHF prices are relatively stable and I did not need the money directly anyway.
3) They have two different ways of doing currency conversion. IDEALPRO and FXCONV (the default). It is possible that you get a slightly better price on IDEALPRO, however this is so small that it should not matter for people like us who are converting small amount of currency (<100'000). If you convert more than 25K, I believe it's automatically using IDEALPRO. But I am really not sure.
Another difference is that FXCONV will create virtual positions in your portfolio. These positions will be visible in the WebTrader for instance. They do not make any difference and generally disappear after some time. You should really not worry about that.
For your math, it seems to make sense. The minimum fee is 2 USD, therefore you should avoid converting very small amounts. As for how they calculate total cash, I do not know, but they probably use real time data and they probably use the market price.
4) Unfortunately, IB will not send you reports by mail. They will only tell you that it is available. I agree that it's pretty useless!
To generate it, you can go to Account Management, click Reports on the left menu and then Statements. And from here you can generate a shitload of different statements.
I realize that there are some things missing from this article, I will improve it when I get the time, it's in my TODO list now :)
Thanks for stopping by!
Actually it’s possible to get HTML reports by email, I don’t remember where it is but somewhere in acct mgmt you can enable it.
Thanks for the tip Maci :)
I will have to check this out, I would like to get a report directly by mail without having to log in.
An useful article thank you. When I bought my VOO a lot of pop up warning showed up. I click ok on all and it worked well, was a bit confused through by all the warning :)
Hi Maxine,
Yeah, the first time I bought something, I was also confused by the warnings. I remember that one of them was because I did not have real-time quotes for United States. Once you get used to it, it’s fine, they just want to protect themselves!
Thanks for sharing :)
Hi,
I cannot buy ETFS such as VWO or GLD… It says that it is only for institutional investors. Anyone with the same problem?
Thanks for the article!
Sorry this was the actual notification ” No Trading Permission, Customer Ineligible; Ineligibility reasons: This product is currently unavailable to clients classified as retail clients. Note: Individual clients and entities that are not large institutions generally are classified as retail clients. There may be other products with similar economic characteristics that are available for you to trade”
Hi David,
That sucks! Which country are you from?
People from the European Union are not allowed anymore to trade in U.S. ETFs since they passed a stupid law to force people to invest in subpar financial products.
Thanks for stopping by!
Hi Mr. The Poor Swiss,
How did you get around the EU laws for US based ETFs? Do you have american citizenship?
Thanks!
Hi Gigiduru,
I am Swiss :) Currently, the EU laws do not apply to Swiss investors.
However, by 2020, there will be a new set of Swiss laws that are mostly mirroring the EU laws. They are slightly different, so it’s not clear if they will block us from investing into U.S. ETF, but it’s probable.
Thanks for stopping by!
Hi
I will start buying ETFs on IB beginning of 2020.
Do you think it makes sense to still buy US ETFs?
I thought of buying the Ireland based ones like the iShares SP500 UCITS or the Vanguard SP500 UCITS.
Another question I d have is:
On which exchange would you buy them? For example, the Vanguard can be bought at SIX in CHF, or LSE in USD and I am trying to figure out where to buy it and in which currency?
Regarding liquidity, it would make sense to buy at LSE no?
Is it also possible to automate purchasing etfs on IB ? Something like a savings plan?
Best,
Reto
Hi Reto,
Yes, I think it still makes sense as long as you can. If you are planning to start next year, you should definitely wait until next year to decide. Maybe we will know on January 1st if something changes or not.
Funds should always be bought in their original currency and in their biggest exchanges. Like this, you won’t pay any fees for currency exchange. And you will have better liquidity (lower spread).
For VUSA, I would buy either on Euronext or on LSE.
I do not know if it’s possible to automate, probably. I do not like automation for my money ;)
Thanks for stopping by!
Guys..if you are from EU, you can invest in UCITS ETFs. Vanguard and many others offer them
Hi Mr. The Poor Swiss (and everyone else!),
I plan to increase my World UCITS ETFs portfolio (also have IBKR, EUR as base currency), and wonder if there is a timing method for when to buy them. I have read in another blog about someone who buys them seasonally every quarter to compensate for fluctuations. Another one just advises to buy during dips. Do you have any specific strategy/approach in regards to when to buy your stocks/ETFs or do you consider that it will gain value in the long term and hence it doesn’t really matter?
Thanks!
Hi Conman,
I do not have any approach to this.
As long as I am investing for the long-term, I am investing whenever I have money, generally once a month. Once a quarter makes sense in order to save on some trading fees (but does not make sense if you use a cheap broker like IBKR).
I do not have any expense investing for the short and medium-term.
Buying the dips is easy to say but complicated to do. If you wait too long, you are going to miss on opportunities. If you do not wait enough, it’s the same thing. Therefore, it’s better to not wait at all :)
What is your current strategy?
Thanks for stopping by!
Hi! Thanks for the feedback! Up to now I was playing around with stocks and ETFs on a small scale to get some experience of the stock market and was mostly trying to buy during dips. But like you said, opportunities are missed that way and funds are left unused. So I might just follow your example and just increase my ETF portfolio whenever I get paid once a month with a view of the long term.
Hi Poor Swiss. Do you know if fractional buying of ETFs is available via IB and how does it work? For example, I don’t want to buy 20 shares of a fund, but rather buy USD 1000-worth of shares? I’m seeing this video on the IB site on the topic https://www.youtube.com/embed/STS54N8DPvs?rel=0
Hi Drago,
Yes, you can trade in fractional shares in IB. By default, this is not enabled. But you can enable it in your account settings. However, this is only available for U.S. stocks. So if you invest in European stocks or Swiss stocks, you won’t be able to do it.
Now, I have never done that. I have not even enabled the option. But I would think that ETFs should work exactly in the same way as stocks since they are basically the same thing.
I personally would not want to trade in fractional shares. The problem is that the share is not really yours. It is held by IB and then shared between different investors. In case a problem arises, it may be difficult to claim the share.
I’d rather keep until the next month and then buy the rest of the shares rather than buy 19.4 shares for instance.
Just know that it won’t make a big difference in the long-term whether you invest 19.5 instead of 19 shares (and then buy a next extra one after two months).
Thanks for stopping by!
Got it, thank you!
I had the same problem, impossible to buy U.S. ETFs, since I’m based in the UK. However, the UK leaves the EU at the end of the month of the current year. Does that mean, beginning February, I will become eligible to buy U.S. ETFs either via Degiro or IB platform?
Hi Pea,
Honestly, I think nobody knows the answer to your question.
I think it will take more time for things to settle after the Brexit (they still have to sign).
But it’s indeed possible that you get back access to U.S. ETFs. But I would think that it will take several months, if not years.
Thanks for stopping by!
Hi Poor Swiss,
I want to start investing into Vanguard’s ETFs such as VT on the US market in USD but just found out about the new law that Swiss people (and European) people are not allowed to buy these anymore…
So I was wondering which ETF do you now buy instead of VT? Your portfolio page (https://thepoorswiss.com/portfolio/) still indicates VT.
And if you buy other ETFs on European markets and other currency is IB being an American company as broker still the cheapest and best choice?
Looking forward to your opinion and ETF choice due to this big “debacle”…
Regards
John
Hi John,
Currently, we are still allowed to buy these funds. It’s just that some brokers such as DEGIRO implemented the law in advance. You can still have it with Interactive Brokers.
I am still having VT in my portfolio. But I wrote a post about European portfolios if you want to take a look.
I am planning an article about comparing brokers for a European portfolio, probably in March.
Thanks for stopping by!
Thank you Mr TPS for your anwser. As I am beginning with FI I have first 100k to invest and then regular amounts into a world index and clearly VT seems the best but then what is the point if after 1 year I can’t invest in it anymore. Also I wonder what will happen with that investment. For example will someday a new regulation force you to sell it?
I already read your post about the EU portfolio, it is an alternative as you nicely explain but as you know the costs simply rise higher and makes everything more complicated. I was looking like you to keep it simple and have max one or two index funds I would invest into.
It looks like nothing beats VT so I am a bit disappointed as a starting FI Swiss person.
Will you actually sell your VT after the regulations are effective? or what are you plans?
Hi John,
That’s a good point to be worried about that.
However, I really do not think there will any law that forces you to sell it. But it could happen indeed although unlikely.
If I still have VT once the regulations kick in, I will not sell, no. I will try to keep it for as long as possible. And I will start investing in the new portfolio from that point forward. I do not think it is a big deal to keep VT and invest in the new portfolio.
You could go with the HSBC MSCI World UCITS ETF instead of VT. That would still be a simple portfolio. The most we are going to lose is with the lack of dividends withholding returns.
Thanks for stopping by!
Thanks again for your opinion, it’s always interesting to read.
The HSBC MSCI World UCITS ETF seems to be a good alternative as it even has a lower TER (0.15%) as the Vanguard FTSE All-World UCITS ETF (0.22%).
I am not sure about what you mean regarding the dividends of the HSBC MSCI world ETF because I checked here:
https://www.justetf.com/ch-en/etf-profile.html?groupField=none&cmode=compare&sortField=ter&sortOrder=asc&from=search&isin=IE00B4X9L533
and under distribution policy is says “distributing”, so if I understand correctly there will be dividends for the investors, or am I missing something?
Furthermore I was wondering if you would rather recommend using DEGIRO for this specific ETF (IE00B4X9L533) because it is listed in there commission free ETF. So there are literally no brokerage fees when buying or selling. The downside I guess is that it is in EUR… I am not sure if it is safer to have ETFs in USD or EUR? What’s your opinion about that?
Hi John,
Sorry I was not clear about the dividends.
You are right the HSBC ETF is distributing. The issue is moving from U.S. ETF to non-U.S. where we lose 15% of the dividends. But this will be the same thing regardless of which ETF we choose.
The problem with HSBC is that it is a very small fund. But most EU funds are too small. So HSBC is a very good option.
You will still pay the currency exchange fee on DEGIRO, which is 0.10% of the converted value (unless you already have EUR on your account, i.e. if you are not Swiss). If it’s a European ETFs, it’s fine to be in EUR.
But if it is one the list of free ETFs, this could be a very good deal on DEGIRO indeed. I would not move over to DEGIRO for that. But if you do not a broker account yet, DEGIRO would be a good option.
Thanks for stopping by!
Thanks for your precision. I get that now, the 15% loss on dividends is because of the US dividend taxes advantage for a Swiss citizen or something like that, which of course does not apply for non-US ETFs.
As you mention that HSBC ETF seems to be quite small in fund size (1.6m) so maybe the following fund might be better:
iShares Core MSCI World UCITS ETF USD (Acc)
this one has a fund size of 23.2m but as its name indicates it does not yield any dividends to the investor and its TER climbs to 0.20%
So for me as a beginner it is difficult to judge if it is better to go for a smaller fund with smaller TER or bigger fund size with a bigger TER (+0.05% compared to HSBC). As far as I understand the FI concept the lower TER the better but the fund size needs to be at least >1m.
Last Friday I opened a DEGIRO account for testing the platform and bought a small amount of VANGUARD S&P500 in EUR on the Euronext exchange of Amsterdam (IE00B3XXRP09). I am mentioning this because you mention the 0.10% currency exchange fee but I just checked on my transactions and I can’t find anywhere this fee being charged. So maybe this fee has already been applied to the exchange rate… I can see in the transaction history that the exchange rate was 0.9335 for converting my CHF into EUR. I use the AutoFX feature (default) of DEGIRO which automatically does the exchange for me when I buy.
Maybe DEGIRO does not apply any exchange fee to the ETFs on their free list, which would really be fantastic as it then beats IB. That would also mean that basically I paid no single fees by buying this ETF, so totally free ETFs?!?
Also if you check https://www.degiro.ch/en/fees/fees/ and click on ETFs there is nothing which mentions that 0.10% exchange rate fee for ETFs. That’s nearly to good to be true so I can hardly believe it but of course you have to stick with the ETFs in their free list.
Hi John,
So, HSBC is not that small. It’s actually 1.6B not 1.6M! But compared to other big U.S. ETFs it’s still fairly small. However, I would still be comfortable investing in this fund.
It’s possible that you do not have to pay currency exchange for their free ETF. But I do not know about that. I just asked them on Twitter, we will see what they say. It would be great if that was the case.
For the currency exchange fees, you have to read the PDF (https://www.degiro.ch/data/pdf/ch-en/CH-EN_Feeschedule.pdf). This fee is not mentioned on the page.
Thanks for sharing your experience. Then, it’s possible indeed that this fee is waived. I’ll wait until DEGIRO answers to be sure, but it would be nice indeed. On my latest tests, this currency exchange fee made a large impact when people invested a lot.
Thanks for stopping by!
Hi Mr TPS,
You are totally right, I checked the factsheet for that HSBC ETF and the AUM is $1,655,059,897.
Thank you for asking DEGIRO regarding the exchange fee, I really wonder what they will answer. As my transaction was only for a “test” amount of CHF 500 maybe it is so small that you don’t even notice, anyway with their interface it is not very transparent. In my opinion it should clearly mention somewhere something like “currency fee” and the amount even if it is 0.
I might also open an account with IB and buy VT ETF in USD in the NYSE as long as possible and then go back to DEGIRO when it is not possible anymore because of the regulations. I am not yet 100% convinced yet about DEGIRO…
Regards,
J.
Hi John,
I got an answer from DEGIRO. They said that the foreign exchange fees are not waived. So you still have to pay them when you buy an ETF from the free list in another currency.
I completely agree that their interface is not very transparent regarding fees. It should be clearly split in purchase price/fee.
If you consider IB, do not forget about the custody fee. If you do not invest a lot, it can weigh on you.
Thanks for stopping by!
Thank you so much for your feedback you got from DEGIRO!
Now it’s clear and I just got fooled because of the small amount I used for that test and could not find this information anywhere. That gives quite a bad first impression unfortunately but at least they have no custody fees as you mention.
So yes I am really considering IB once I am sure I want to invest 100k immediately in order to avoid the 10 USD/month custody fee.
Thank you for this article. I would like to ask 2 questions.
1) I would like to buy USD with EUR, but symbol USD.EUR is not available. I can find only EUR.USD. Do you know why?
2) If I find a specific ETF, it can be available in different currencies. I can see ETF price, but I don’t see its currency. How can I see this?
Hi Andrej,
1) That’s weird, I was thinking it would be available, it seems like an important forex operation. You can always do two operations, but it’s not great. You can trade to use the convert currency operation that is on the mobile application.
2) That’s a good question. I never had this issue before. If you open the ETF view, you will see a big “Fundamentals” button on the top right, this will give you a ton of information about the ETF, you will find the currency in some of these pages.
Thanks for stopping by!
I cannot find this trading interface on IB. Have they done away with it or how do you get to it?
Hi Betty,
This is the default interface of IB when you connect from their website. It may not be known as “Account Management”, but as the default interface for most people.
Does that make sense?
I’m torn here. I opened the account on IB.
Now I need to choose a fund. And it’s either VWRD.L but the average volume seems to be super low – around 57 000 trades.
It seems super low to me.
Hi Jack,
If you are Swiss, you should invest in U.S. ETF, like VT, it is much bigger, has lower fees, is more tax efficient and the volume is much bigger.
It is low, but not super low for a European ETF. You will never get the same trading volume as some huge U.S. ETF.
At least, I would not stop investing in a fund just because it has only 60k trades per day.
Thanks for stopping by!
Hi,
for some reasons it seems not possible to trade US ETFs as a European Citizen. I read this on another blog and tried it several times.
Do you have any specific trading permission?
Thanks
Hi Mat,
You are right :) But Swiss people are not EU citizens.
For now, we still have access to U.S. ETF from some brokers.
Thanks for stopping by!
Hi Mr. Pool Swiss,
I have converted some CHF to USD with the above-mentioned method.
At the beginning a warning from IB saying that the order size is below USD 25000 IdealPro minimum and will be routed as an odd lot order. But later when the order is filled, I find that it is indicated “Bot…on IDEALPRO” with the “USD.CHF” on my list of orders and trades. So here does it mean that the conversion has been routed with IdealPro? Then when I click on it, it’s like I have a position opened and trading like the other ETF and there is a button “close position”. So is this “position” virtual? Can I or should I ignore it? I feel confused because I just wanted to exchange currency to trade ETF with USD. I try to understand why there is such a “close position” button, so here below is what I’m thinking:
1. It’s just for information, So I can ignore it. (But it’s so weird to see the button “close position” there.)
2. If I close the position, since I have ETF trading with USD, what’s going to happen then…
3. Does it mean actually IB just lent me USD (with my CHF deposit as guarantee) to trade my ETF with USD, if I don’t close the position, then it means that I am also trading the currency and taking risk on it. If that’s the case, I might want to close the position when possible and at a good moment.
Any idea about this experience?
Thank you in advance for your help.
Kelly
Hi sir, I am trying to buy the USD-denominated QQQ on London Stock exchange(LSE). Based on yahoo finance and Invesco website, the symbol is EQQU.
In IBKR, I can only find the EQQQ which is listed in LSE but denominated in GBp (British pence). There is also a EQQQ1 which is denominated in USD but listed in EBS (Swiss Exchange if i understand correctly). I wrote to customer service but the reply was not helpful. When i check the stock quotes for EQQU and EQQQ1, there is a slight difference.
Is EQQQ1 in IBKR the same product as EQQU ? I have been googling for more info but couldn’t find any useful info. I am trying to DCA into QQQ over the long rum but don’t wish to start off with buying the wrong etf.
Any advice ? Thanks
Hi Kh,
Sorry to hear about your experience.
It seems to be the same ETF, but I am honestly not sure, I do not know any of these products. I can confirm the same thing from my account though.
What did the support say?
Sorry to not be able to help more, I do not know these ETFs.
Hello!
Great article! Thank you
In order to buy ETFs with IB as an european you need trading permissions to Stock, or?
Thanks
Hi Stefan,
When you open an Interactive Brokers, you will have to request trading permissions for each of the stock exchanges you are interested in. ETFs are traded like stocks, so you need the same permissions.
For instance, I have requested permissions for the SIX stock exchange and the main U.S. Stock Exchanges.
Keep in mind that as a member of the European Union, you cannot trade in U.S. ETFs.
Thanks for stopping by!
Hi TPS,
Thanks so much for this great resource that is your blog. It is really difficult to find relevant information for people living in Switzerland.
I am new to IB and I have two questions:
-When I hold a position that is not in my base currency (CHF) the system tells me that unless I have that amount in cash they will create a margin account and I will have to pay interest on that. This could be a big problem for me because if I invest in VT, for example, I would need to have a balance in cash for USD equivalent to the amount I invest, which makes no financial sense to me. The only solution I see is to change the base currency to USD, but that is not really a solution as I would still face the same issue with EUR and then with CHF ETFs. What is your recommendation?
-A second question is wrt the ETF TERs. I want to develop an ETF portfolio with a focus on low TER. However, sometimes the same ETF has European, American, or institutional versions with slightly different fees, so it is difficult to know how much a Swiss investor has to pay as TER. Is there a repository of factsheets in Interactive Brokers where you can check before investing?
Hi Lui,
Thanks for your kind words.
1) First, did you choose a margin account or a cash account? For most people, a cash account makes more sense. Now, regarding foreign currencies, you need to exchange your CHF in USD before you buy (or go on margin, but I do not think this is what you want).
You can do that either by buying USD.CHF (USD priced in CHF) or using the convert currency tool in the left menu.
2) If you are Swiss, you can invest in U.S. ETFs. And they are the best ones because they are more tax efficient. So, you should only focus on American ETFs when they are available.
Thanks for stopping by!
Hi again TPS,
Many thanks for your fast reponse. Let me show you what I meant by this transfer of positions from assets not in my base currency. Once I ordered this transfer this is the message I got:
Dear Client,
Please review the information below which relates to positions transferred into your account U******3 on 26-AUG-20.
You are transferring positions denominated in a currency other than your account’s base currency. To learn more about trading in a currency other than your account’s base currency, please watch this short video.
– LYXIB
The message doesnt say much but the video does: https://www.interactivebrokers.com/en/general/education/videos/trading-overseas-tws.php
My account is standard and I am not interested in any margin account or any leverage. Have you ever come accross something similar?
Re. ETF TERs, can you check that anywhere upfront in IB or you just check justetf.com?
Cheers!
Hi Luis,
So, you are transferring securities from another broker, is that it?
Then, I do not think there is an issue. This will just mean that some of your assets will be USD. If you want to buy more of them, you will have to convert USD and if you want to sell them, they will give you USD.
I have never transferred anything to IB, but I do not think this would be an issue.
For most ETFs, if you search for the ETF Ticket in IB, you will find detailed information about the ETF.
Thanks for stopping by!