How to buy an ETF on Interactive Brokers the easy way

Mr. The Poor Swiss | Updated: | Investing
How to buy an ETF on Interactive Brokers the easy way

(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 am now able to do all the operations I need easily. I will show you exactly how to buy an ETF from start to finish on IB, the easy way!

I have been contacted a few times by readers that were having a hard time starting with Interactive Brokers. This is indeed a little complicated at first, but it becomes very easy after you do it once. If you follow this guide, you will be able to buy ETFs from IB without any issue!

In this guide, you will 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 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

Best Broker for Swiss Investors
Interactive Brokers

Interactive Brokers is an outstanding broker, with extremely affordable fees! Trade U.S. security for as little as 0.5 USD!

Interactive Brokers has several different user interfaces:

  • Account Management
  • Web Trader
  • IBKR Mobile
  • Trading Workstation (TWS)

In this guide, you will see how to buy an ETF from the Account Management interface. This is the simplest of all the interfaces. And this interface has all the features you need to buy your first ETF from Interactive Brokers. If you want to learn more, I have a guide on the different IB interfaces. But do not worry, you really only need one!

This guide will 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, the process is the same for any ETF. For instance, every month, I follow the same steps to buy into VT, my favorite ETF, and the same steps to buy 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 am going to assume that you already have an Interactive Brokers account. If you do not have one yet, you can read my guide on how to open an Interactive Brokers account. And then, you can come back once you have created your account!

Account Management 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 good for most tasks. This is the only interface I am using for trading 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 Log In button.

Interactive Brokers Login options
Interactive Brokers Login options

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. As an example, let’s say you want to transfer 5000 CHF to your IB account.

There are two steps in this process:

  1. First, create a new deposit method.
  2. Then, 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. This is extremely convenient if you want to fund your account from different sources.

IB Account Management - New deposit method
IB Account Management – New deposit method

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 in some information about this deposit method.

IB Account Management - Deposit Method
IB Account Management – 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.

IB Account Management - Select Deposit Method
IB Account Management – Select Deposit Method

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 plan to send money to IB.

IB Account Management - Select Deposit Method
IB Account Management – Select Deposit Method

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.

IB Account Management - Wire Transfer
IB Account Management – Wire 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. If you do not use the proper information, it may take a while for the transfer to be processed and returned to your bank account.

You can then initiate the transfer from your bank. If you transfer CHF, make sure to use the CH IBAN (IB should present it by default). That way, the transfer will be entirely free. Once the transfer is initiated, it may take a few days to reach IB. But, 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.

Note that you may be assigned another IBAN (from Credit Suisse) to wire money to your account depending on when you created your account. This is also a CH IBAN to which you can transfer without any fees. In this case, just follow the instructions given to you by IB.

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. It is very simple to do so from the account management interface.

You can go into the menu and click on Convert Currency.

Convert currency from the account management interface of IB
Convert currency from the account management interface of IB

 

In this view, you can simply choose which currency you want to convert and into which currency. Next, enter the amount you want to convert, and then 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 a little more control, there is another way to convert currency. You can buy currency like you buy shares (see next section). For instance, you can buy shares of 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 will give you a little 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 me time.

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 (or any other ETF). You can use the search function from the top right of the interface.

IB Account Management - has several options for VOO
IB Account Management – has several options for VOO

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)). ETFs are listed as Stock. And sometimes, you will also see several exchanges. Here, we want the Stock on the ARCA exchange.

IB Account Management - Trade VOO
IB Account Management – Trade VOO

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 simple 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 as well as 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 simply 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.

Personally, 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 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.

I would advise you to use the Preview option to make sure this is what you want.

IB Account Management - Preview VOO Trade
IB Account Management – Preview VOO Trade

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 (yes, IB is that cheap!). Once you are satisfied with your order, you can click on 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 it. A limit order will be executed 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 use 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 use 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. It just means that 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. Passive investors do not need real-time pricing!

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 uses 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 order will not be taken 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 is a good thing for honest investors like you and me.

Once again, you can safely ignore this warning.

Conclusion

Best Broker for Swiss Investors
Interactive Brokers

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 (or any other ETF you wanted to buy). 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.

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 that is not an issue for simple passive investors. This is the only interface I am using, and I never found anything missing for me. I invest every month with 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.

If you prefer trading from your mobile, 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?

Mr. The Poor Swiss is the author behind thepoorswiss.com. In 2017, he realized that he was falling into the trap of lifestyle inflation. He decided to cut on his expenses and increase his income. This blog is relating his story and findings. In 2019, he is saving more than 50% of his income. He made it a goal to reach Financial Independence. You can send Mr. The Poor Swiss a message here.

120 thoughts on “How to buy an ETF on Interactive Brokers the easy way”

  1. I’m also very much interested in trading ETF Gold. However I am holding few quantities in my Kotak Stock trader app’s portfolio.

  2. I noticed it’s possible to buy VWRL via IB now listed on Swiss stock exchange.
    Given it’s in USD anyway is there any advantage or disadvantage to investing in this vehicle vs just converting to USD & buying a US vanguard ETF?

    Appreciate your thoughts.

    1. Hi Peter,

      Keep in mind that even if you buy it in CHF on SWX, you will still hold exactly the same ETF, in dollars. The conversion will just be done automatically.
      There are not much differences between these two options. The SWX listing may have lower volume, so the spread may be worse on SWX.
      Also, the transaction fees are likely higher on SWX than on any other exchange in most brokers.
      With IB, I think it’s better to do the conversion and buy it on the proper stock exchange in USD, this will be cheaper and will have better spread.
      With other brokers, it’s more debatable because currency conversions maybe more expensive.

  3. Hi Mr. poor Swiss!

    Thanks for the informative articles! I opened an account at IB and it seems I cannot invest in US ETFs. This is the answer I got from their support team:

    Dear Madam/Sir

    As a Swiss national and resident I would like to trade US ETFs. Is this possible?

    Thanks
    IBCS 2021/06/01 20:44:14
    Dear Mr.

    IBKR offers the possibility to be classified as a Professional in terms of Mifid category which will allow you to trade all US listed ETFs.

    With respect to MiFID regulations, Interactive Brokers is required to categorize its clients as either Retail or Professional in order to determine the correct level of investor protection and transparency. It is possible to be reclassified from Retail to Professional once certain qualitative, quantitative and procedural requirements are met.

    Qualitative Requirements : we must conduct an assessment of your expertise, experience and knowledge to ensure that you are capable of making your own investment decisions and that you understand the risks involved.

    Quantitative Requirements : we must ensure you have satisfied two of the following criteria:
    -You have carried out trades in significant size (EUR 200,000 or greater) on the relevant market at an average frequency of 10 per quarter over the previous 4 quarters;
    -Your entire portfolio including cash (and positions not held with IBKR) exceeds EUR 500,000;
    -You have worked in the financial sector for at least 1 year in a professional position.

    Procedural Requirements : if you believe you meet the requirements to be reclassified as a Professional, you can submit a request to change your status in Client Portal > Under Settings, select “Account Settings” > Configuration clicking on the gear (Configure) icon next to “MiFID Client Category” and following the steps on the screen.

    Please note : Depending on your situation you might be requested to upload documentation of portfolios held or trades executed away from IBKR supporting your request;
    You will be presented with the “Professional Client Notification” document which explains the protections and investor compensation rights you will lose from being classified as Professional. You can also download this document in the Forms and Disclosures page of the IBKR website.

    If all of the above are satisfied, our team will review the request.

    Regards,
    Twinkle S
    IBKR Client Services

    1. Hi John,

      Their answer is incorrect. MiFID regulations do not apply to Swiss citizens since we are not part of the EU. Currently, we do not have to change the MiFID category as Swiss citizens on IB.
      You should reply to them that this should not apply to you.

      1. I agree! Unfortunately I got the following reply :-(

        Dear Mr.,

        MiFID regulations are applied for IB-UK accounts.

        Regards,
        Twinkle S
        IBKR Client Services

      2. Hi Mr. The Poor Swiss

        Thanks for this extensive collection of very helpful information!

        I have one particular question to the topic discussed in this thread: From the articles that I read today, I got a little confused about the applicability of PRIIPS / MiFID II concerning CH vs. EU -> Does this focus on country of residency or country of nationality/citizenship?

        Concretely: My citizenship is of an EU country but I live in CH with the permanent residency permit (C)… Would I under these conditions also theoretically still be allowed to trade US ETFs at IB, or would I need to have CH citizenship to benefit from this exemption?

        Would be great if you could shed some light on this! Many thanks in advance :)

        1. Hi Sunny,

          I believe it focuses on tax residency (where you pay taxes), so it’s more about residency than citizenship.
          I believe in your case you should be able to buy U.S ETFs at IB. Be sure to indicate residency in Switzerland and indicate that you only pay taxes here.
          But I am not an expert, that’s just my interpretation :)

          1. Hi Mr The Poor Swiss

            Thanks for your interpretation, I would also understand it rather this way around – this confirms my assumption… so let’s see ;)

          2. Hi Mr. The Poor Swiss

            First of all I want to tank you for your great work on this blog!
            Following the questions about buying US ETFs, as long as I live in Switzerland its possible, but what happens if I want to Fire and move to a EU Country? Can I keep my portfolio and apply the 4% rule or do I have to get rid off my stocks on US ETFs?
            Thanks

          3. Hi Ron,

            In theory, you should still be able to keep your investments and only sell them, not buy more of them. So, you should be able to keep them and live from them.
            Keep also in mind that the efficiency of U.S. ETFs is linked to the income tax treaty with Switzerland. If you are in France, these ETFs may not be that efficient.

  4. Hello,

    Many thanks for this – super helpful! Is there a difference in fees for buying stockers piecemeal or more at a time? E.g. does it matter if you buy 10x $1,000 vs 1 x $10,000?

    cheers,

    1. Hi Robin,

      You will pay more fees by buying in several groups than in one. However, for U.S. stocks, the fees of IB are so low, it almost does not matter. Buying $10×1000 will cost you something like $3.5 to $4 while buying once $10000 will cost you something like $0.50.

  5. Hi there,

    Thank you for this tutorial :)

    After some research i’ve decided to invest in the VWRL to avoid issues in the future with US ETF like VT. (Change of regulation, taxation, etc…)
    I though it was safer/simpler to invest in European ETF tracking the exact same thing.

    What is you opinion in this ?

    Max

    1. Hi Max,

      U.S. ETFs have several advantages outlined in this article.
      But this is optimization. VWRL is a great ETF. You can absolutely succeed with VWRL if you prefer to keep it simple, with no problems. If you want to invest the extra complexity, you can optimize it a little with VT.

  6. One thing that I personally hate about IB is that once the funds (CHF) are transferred and then converted into USD, one needs to wait 3 days to have them settled… a margin account is the only solution it seems.

    1. Hi mat,

      That’s weird, I have never had to wait for my funds to settle. But I know other people that need to wait for it to settle.
      But indeed, a margin account would bypass that limitation. This is a common limitation of many brokers that trade need to settle before you can use the money.

  7. Thanks for the useful article. Question about market vs limit orders. In the article above your recommendation is market order. In the linked article about stock market order types the preference seems to be limit orders. Have I misunderstood something? (we share the buy-hold mentality)
    Thank you!

    1. Hi Evan,

      I will have to update the article about stock market order types. For well-known and high-volume ETFs, market orders are perfectly fine if you want to buy and hold.
      If you are trading with instruments with a higher spread, a limit order may be better, but for my ETFs, I only use Market orders, they are fine.

  8. Thank you for the article, however, I couldn’t buy US ETF, received a disclaimer. I Googled some info about this issue, and turns out that EU clients can’t purchase US ETF… I live in Cyprus.. May be for Switzerland is better conditions.

    1. Hi Eleonora,

      Unfortunately, EU people currently cannot access U.S. ETFs. But we can in Switzerland since we are not part of the EU.
      There is not much you can do except trade with complicated instruments like options to bypass that (which I would not recommend).

  9. Dear Poor Swiss Blogger,
    Following your excellent instructions, I was able to transfer wire, convert CHF TO USD and vice-versa too, as well as buy the first CHF stocks. Unfortuantely, I still cannot buy any US stocks nor ETF’s. I get a pop-up window saying you need to complete atleast 100 trades to get this permission

    1. Hi Prabitha,

      I have never seen that pop-up :s
      In the account management settings, you can configure how much experience you have with stocks, you may be able to set that to a higher number and be able to buy U.S. stocks with that. I know that there is a limit of 100 trades for trading with options. Are you sure you are not selecting the options for the ETF and not the ETF itself?

  10. Hello Mr. Poor Swiss,
    you have a very nice blog, very useful for beginners. I would like to start my investments with IB. And found out that they have negative interest for account ballance in CHF. Could you please advse which amount should be kept on account for covering fees?
    Thank you for your advise.

    1. Hi Elena,

      The negative interest rates are only on balances of more than 100’000 CHF cash. So, if you have less than that, you will not need to pay any negative interest rate :)

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