How to buy an ETF on Interactive Brokers from Account Management

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How to buy an ETF on IB from Account Management

I have recently started using Interactive Brokers (IB). It took a while for me to get used to this system. I discovered that Interactive Brokers has many interfaces from which you can trade. It is really overwhelming at first. I have been contacted a few times by readers that were having a hard time starting with Interactive Brokers. And unfortunately, I did not have any good resource on the subject to help them. Moreover, many people do not know that the Account Management interface can be used for most tasks.

This is why I plan to make a few posts explaining some basic features of Interactive Brokers. The idea is to help everyone that is starting with Interactive Brokers to do the basic tasks in each interface. I will try to cover funding the account, converting currencies and buy and selling shares for each of the posts.

In this post, I am going to go over how to buy the VOO (Vanguard S&P 500) ETF from the Account Management interface. Even though my example will focus on the VOO ETF, it is the same for any ETF. We are going to go over all the steps. The process starts with transferring the money to IB, then converting it to USD and then finally buying the ETF. Of course, if your base currency is USD, you do not need step 2. And if your account is already funded, you do not need the first step either.

For this, I am going to assume that you have an Interactive Brokers account. If you do not have one yet, you can read how to open an Interactive Brokers account.

Account Management Interface

Interactive Brokers
Interactive Brokers

The Account Management interface is the default interface of Interactive Brokers (IB). I talked at length about the different interfaces of IB. This interface allows you to do almost everything:

  • You can visualize your portfolio and see your investing performance.
  • You can do basic trading. Some of the advanced options for trading are not available from this interface.
  • You can request a transfer of funds.
  • You can generate reports of your activity or results.

I believe this interface is really good for most tasks. And this is the one I am using the most since it is also the simplest of them all to use.

To open this interface, you can go to the Interactive Brokers website. From there, you can click on the red Log In button.

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. You will need to enter your account name and password. And you will also need to use your phone for two-factor authentication.

Transferring money from Account Management

If you do not have enough money to do the trade you want, you will first have to fund your account. For this, Account Management is the best interface. Let’s say you want to transfer 5000 CHF on your IB account.

There are two steps in this process:

  1. Create a new deposit method.
  2. Declare an incoming transfer from a deposit method.

The first step is only necessary if you never made a transfer from this source. If you already did it, you can skip it. Let’s see how to do both of the steps.

1. Create a new deposit method

On Interactive Brokers, you need to declare first the source of the transfer. This is only necessary to do this once for each source. You can have many sources in many different currencies. It does not have to be in the same currency as your account currency.

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 some information about this deposit method.

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

Make sure to double check all the information. This will be used to associate the incoming funds to your account. If something does not match, the fund transfer may be delayed.

2. Declare new wire transfer

Once you have created your deposit method, you will need to declare a new transfer from this method. This will be necessary every time you do a transfer.

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 are planning 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, here 5000 CHF, 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 should give you all the necessary information to perform the wire transfer from your bank. Be careful about setting the correct message to the recipient. This should contain your account number and your name. This is what Interactive Brokers will use to identify the transfer as going to your account.

You can then initiate the transfer from your bank. If you transfer CHF, make sure to use the CH IBAN. That way, the transfer will be entirely free. Once the transfer is initiated, it may take a few days to reach IB. Generally, it is quite fast. As soon as the transfer is executed by my bank, I generally see the money on my IB account the same day.

Convert currency from Account Management

If you plan to buy an ETF that is not in your base currency, you will first have to buy this currency. Contrary to other brokers, you do not have an option to simply convert the currency. As we will see, this is done in a similar way to trading stocks. On the other hand, it is very cheap to convert currencies on Interactive Brokers.

For the sake of the example, let’s assume you want to convert your CHF into 5000 USD. You can start by pressing the trade button on the top right of the page.

IB Account Management - Trade USD against CHF
IB Account Management – Trade USD against CHF

From there, you can search for USD.CHF. This is the name of what you want to buy. It means you are going to buy USD with CHF. If you want to buy USD with EUR, you can look for USD.EUR. If you want to buy EUR with USD, you can trade for EUR.USD. You get the idea!

Then, you can set the amount you want as well as the Limit price. Since it is a trade, you can use several order types: Market, Limit, Stop and Stop Limit. I recommend only using Limit. 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).

Once you are sure of what you want, you can either click on Preview to view how much you are going to pay or directly click on Submit Buy Order to send the order to IB. Once it is submitted, you just have to way until it is executed and you can use your newly converted cash. Unless you put a Limit that is very different from the market price, this should be executed very quickly.

Buy an ETF from Account Management

Once you have enough cash in the correct currency, you can now buy some shares of the VOO ETF. If you followed the previous section, you will already be familiar as to how to do it. It is exactly the same process! You can open the Trade window by using the Trade button from the top right of the interface.

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)). 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

You can set the limit price for buying the ETF and the number of shares you want. You can also use other order types, but Limit is generally what you want. I would advise you to use the Preview option to then make sure this is what you want.

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

This will give you all the information you want about the order. You need to pay special attention to the amount and the commission. Here, for instance, I would have paid 5328.60 USD for the purchase of 20 shares and I would have only paid fees between 0.31 and 0.41 USD. Once you are satisfied with your order, you can Submit it and wait for it to be executed.

Conclusion

Now, you are already done! You will now have more shares of the VOO ETF. The entire process is exactly the same for any other ETF. You just have to change the name you are searching for and if it is available in IB, you will be able to buy it as well. It is really simple to trade from the Account Management interface. You can do all the basic investing tasks from this interface. It is likely that most simple investors will never need any other interface.

As you can see, you can do much from the Account Management interface. Even though its name talks only about managing your account, it can do much more than that! You can do most things on this interface. There are a few limitations. For instance, some of the Interactive Brokers order types are not available. But most of the time, the only type of order you need is a Limit order. So that should not be an issue.

For beginners with Interactive Brokers, I really recommend using the Account Management interface. Once you are more familiar with it, and if you are interested, you can start exploring the other interfaces. But you can go your whole investing life only using this single interface.

Do you have any question on how to use IB? Do you have any tip for the Account Management interface?

Author: Mr. The Poor Swiss

Mr. The Poor Swiss is the main author behind thepoorswiss.com. In 2017, he realized that he was spending more and more every year, 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 2018, he saved more than 40% of his income. He made it a goal to reach Financial Independence. You can send Mr. The Poor Swiss a message here.

10 thoughts on “How to buy an ETF on Interactive Brokers from Account Management”

  1. 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.

    1. 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!

  2. 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?

    1. 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 :)

  3. 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 [email protected] :

    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.

    1. 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!

      1. 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.

  4. 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 :)

    1. 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 :)

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