Interactive Brokers Review: Great for Large Balances, Low Margin Rates

Interactive Brokers might be for you if: You want to keep expenses low and like to use margin. IB stands out in offering some of the lowest commissions and margin rates we've seen. In this Interactive Brokers review, we'll explain how the online stock broker compares on key factors we think are most important to consider before opening an account. Find out more about the pros and cons below.

Author's note: Most of my personal investing is either basic retirement savings or dabbling in retail stocks. As such, a lot of the tools Interactive Brokers offers are well above my experience level. I personally prefer brokerages with simpler, easier-to-navigate interfaces and more user-friendly tools. If you're really into investing and/or want to take a deeper dive, however, you will probably enjoy the robust tools and research options.

Here at The Motley Fool Ascent, we pride ourselves as real users of most of the products across our site. Tim White, our Director of Technology, uses Interactive Brokers. Here's his experience:

If you can invest in it, chances are good you can do so through Interactive Brokers. The online brokerage has a vast array of markets and trading vehicles, both in the U.S. and around the world.

Investments

• Bonds
• Contracts for differences
• Cryptocurrency
• Debt instruments
• ETFs
• Futures
• Futures options
• Foreign exchange
• Mutual funds
• Options
• Precious metals
• Stocks
• U.S. Equities

Brokerage accounts

• Advisor
• Broker and FCM
• Family office
• Hedge fund
• Individual investment
• IRA
• Money manager
• Mutual fund
• Non-professional advisor
• Proprietary trading groups
• Small business
• Trust
• UGMA/UTMA

Before we get into a discussion of Interactive Brokers' pricing, it's important to mention that there are two pricing plans from which customers can choose.

IBKR Lite: The IBKR Lite plan has commission-free trading, but is lighter on features and has higher interest rates for margin loans. For options trading, the IBKR Lite plan offers a flat commission rate of $0.65 per contract and $0.85 per futures contract. The IBKR Lite plan is sufficient to meet the needs of most U.S. investors.

IBKR Pro: The IBKR Pro plan is intended for frequent and professional traders and charges significantly lower rates on margin loans. It offers more features while also offering higher interest rates on uninvested cash. IBKR Pro users can use the fixed or tiered commission plan.

Margin rates

Interactive Brokers' margin rates are some of the lowest we've come across. Here's a rundown of its effective margin rates by margin balance. Note that "BM" stands for "benchmark rate."

Research and education

This brokerage offers a wealth of research, with a catch: Not all of it is free, as certain research providers charge a flat-rate monthly subscription fee for access. We'll explain in more detail.

Some of the stuff you can get for free:

• News: Interactive Brokers offers news and reports from a variety of sources, including 24/7 Wall Street, a daily brief from Dow Jones, and reports from Market Realist. It also offers Social Sentiment data from MediaSentiment, as well as real-time updated crypto news from The Tie, Coin Metrics, and Benzinga.
• Mutual fund/ETF replicator: This tool is really valuable for fund investors. It enables you to enter a ticker symbol to find mutual funds and ETFs that offer a similar performance profile.
• Market scanner: This tool is excellent for finding investments based on fundamental and technical parameters. If you want to find stocks that pay a dividend of more than 2%, have a P/E ratio under 20, and are based in Angola, you can do it with a few clicks. The depth of its screening tools is really remarkable.

Beyond these freebies, research you might expect to receive for free at other brokers isn't free at Interactive Brokers. For example, many brokers offer Morningstar equity research reports for free, but Interactive Brokers' non-professional customers pay per month for the service.

That said, a la carte research and news options are plentiful, and many offer a free trial so you can see what you'll get before you commit to a monthly charge for access. Additionally, IBKR offers The Research Data Bundle for each region. It includes the following: Region Specific Dow Jones Trader News, Briefing.com, MT Newswires, The Fly, and Trading Central.

Interactive Brokers has very robust trading platforms, both on desktop and mobile. So much so, in fact, that investing beginners may feel somewhat intimidated, and there is a definitive learning curve to using the platforms.

IB Trader Workstation (TWS): TWS is a full-featured desktop trading platform that offers all the functionality (and more!) that investors have come to expect from desktop solutions. Fully customizable, you can design your screen how you want to. Its watch list feature can include an extraordinary amount of information on every stock, from its P/E ratio to how many days it takes the company to sell its inventory, on average. TWS is chock full of screeners, stock option analysis tools, and backtesting options.

IBKR Desktop: The newest addition to Interactive Brokers' platforms, IBKR Desktop offers the same tools as TWS, as well as extra features suggested by clients. Interactive Brokers says this platform is more beginner-friendly than TWS, promising "it's just as easy to create a complex multi-leg option strategy as it is to buy a single stock."

If you'd rather not download anything, you also have the option to use the IBKR Client Portal, which offers all of the essentials, including the ability to view, trade, and manage your account, all from your browser.

App

Interactive Brokers' flagship app is IBKR Mobile, available on iOS and Android devices. The app offers streaming data, charting tools, and the ability to place even the most complex trades from a mobile device. With access to over 150 worldwide markets, mobile users will find that there are no limitations on their ability to trade from the palm of their hand.

For a more streamlined mobile experience, the newer IBKR GlobalTrader app provides a clean interface with minimal data overload. Users can access more than 90 worldwide stock exchanges, as well as trade options in more than 30 market centers. There's also the ability to trade cryptocurrencies -- including Bitcoin, Ethereum, and Litecoin -- from anywhere, 24/7.

Reviews on Interactive Brokers' customer service are a mixed bag. Some folks report having no issues getting prompt service, while others complain that the waits are long. There may be a quality difference between U.K./European support and U.S. support.

You have a few different options for contacting Interactive Brokers customer service:

• By phone: 877-442-2757 Toll-Free, 8 a.m. to 8 p.m. ET (Mon - Fri)
• Online chat for existing clients, 24/5 (Mon - Fri)
• iBot automated response system

Interactive Brokers maintains high security standards for both desktop and mobile services, including two-factor authentication. Eligible devices can make use of fingerprint or Face ID features. You may also choose to use the IBKR Mobile Authentication (IB Key) app.

From an institutional standpoint, Interactive Brokers is a well-established brokerage with more than 2.5 million client accounts and over $10 billion in excess regulatory capital. Client securities accounts are protected by both the SIPC, as well as an excess SIPC policy through Lloyd's of London.

Interactive Brokers began in 1977 when its now-Chairman, Thomas Peterffy, bought a seat on the American Stock Exchange. In 1993, Interactive Brokers Inc., was incorporated as a U.S. broker-dealer, and executed its first public client trade in 1995. Interactive Brokers Group, Inc., went public in May of 2007.

Learn more about Interactive Brokers

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At The Motley Fool Ascent, brokerages are rated on a scale of one to five stars. We primarily focus on fees, available assets, and account types; however, we also take into account features like research, education, tax-loss harvesting, and highly rated mobile apps. Our highest-rated brokerages generally include low fees, a diverse range of assets and account types, and useful platform features.

See our full methodology here: Ratings Methodology