Tired of working from home for a boss using the pandemic as an excuse to add to your workload? Investing your money wisely can be your first step towards financial freedom and firing your boss.
But before you can (or cannot) trade your way to becoming an investment superstar, you need to open an investment brokerage account.
Interactive Brokers, also known as IBKR, is just one of the many options available to you. Let’s see if it’s worth considering.
What is Interactive Brokers?
Interactive Brokers is an American brokerage company that also operates in Singapore. It is currently one of the largest trading platforms in the US and also has a strong presence in Asia.
The company is listed on the NASDAQ. So if you really want to be meta, you can even trade IBKR stocks on your Interactive Brokers platform.
Interactive Brokers ‘platform allows you to invest in stocks, options, futures, currencies, bonds and funds in 135 markets in 33 countries, including our good ol’ Singapore Exchange.
More importantly, it’s also one of the cheapest trading accounts right now.
Interactive Brokers Overview: Fees, Platforms & More
| Commercial products | Stocks, ETFs, Bonds, Options, Futures, FX, Mutual Funds, Metals |
| Minimum commission fee (SG shares) | 0.08 percent (at least 2.50 SGD) |
| Minimum commission fee (US stocks) | $ 0.005 per share ($ 1 minimum) |
| Minimum funding amount | None |
| Warehousing type | Custodian |
| Trading platforms | IBKR Lite, IBKR Pro |
| Payment method | Electronic transfer, wire transfer, check, online bill payment |
| Inactivity fee | 10 USD |
Interactive Brokers Singapore Commission Fees
Interactive Brokers charges a commission fee of 0.08 percent for Singapore stocks, with a minimum commission of SGD 2.50.
IBKR’s minimum commission of $ 2.50 is one of the lowest on the market, with bank brokers like DBS Vickers or OCBC Securities charging up to $ 25 per trade.
For small trades on SGX, Interactive Brokers is certainly cheaper than Saxo Markets, which charges a minimum commission of $ 5 – but you can go even cheaper with newbies like Tiger Brokers and Moomoo. Compare the cheapest Singapore stocks brokers here.
For US stocks, they charge $ 0.005 (S $ 0.0068) per share, with a minimum of $ 1. This is the lowest minimum commission on the market with the exception of TD Ameritrade.
With IBKR’s low minimum commissions, you can get started right away and make small trades without having to worry about losing money on high commission fees.
Note, however, that if you have an account size of $ 100,000 or less and you generate commissions of less than $ 10 to $ 20 in a calendar month, you will be charged an inactivity fee.
ALSO READ: All the Hidden (and Not Quite-So Hidden Fees) You Should Know When Investing In Stocks
Can you avoid Interactive Brokers Inactivity Fee?
Probably the biggest downside to Interactive Brokers is that they charge an inactivity fee unless you can meet certain criteria:
| Net liquidation value of the account | criteria | Inactivity fee |
| <$ 2,000 | Monthly commissions must be at least $ 20 | $ 20 minus commissions paid |
| At least $ 2,000 but <$ 100,000 | Monthly commissions must be at least $ 10 | $ 10 less commissions paid |
| $ 100,000 and more | – | Given up |
If you can afford it, the easiest way to avoid the fee is to make sure your account value is at least $ 100,000.
Otherwise, if you have an account value of $ 2,000 or more, you will need to trade SGX shares worth approximately SGD 16,550 (based on the current exchange rate) to avoid fees.
The inactivity fee doubles to a maximum of $ 20 if you have an account value of less than $ 2,000, and to avoid the fee, you’ll also need to trade SGX shares worth $ 33,100, which is likely not given its low value Bank balance.
If you find yourself in this situation because you are either out of cash or you have lost money, it is best to close your account until there is more money available.
Saxo vs Interactive Brokers – Which is Better?
Saxo Markets is another well-established online brokerage brand popular in Singapore and known for their affordable trading fees.
In terms of commission fees, Interactive Brokers is cheaper than Saxo Markets. IBKR charges much lower minimum commissions than Saxo, making it a cheaper choice for small and frequent trades.
If you’re more of a buy-and-hold investor, you should probably choose Saxo as they don’t charge IBKR’s dreaded inactivity fee. However, you will receive an annual custodian fee of 0.12 percent on all of your holdings with Saxo.
On the flip side, if you’re a frequent trader and have no problem hitting Interactive Brokers’ minimum monthly commissions OR are willing to hold an account value of at least $ 100,000, then Interactive Brokers could end up being cheaper.
Interactive Brokers vs Tiger Brokers – Which is Better?
If you are a cost conscious investor, then you have heard of Tiger Brokers. Although not as established as IBKR, Tiger Brokers is a new brokerage company that IBKR has as one of their investors.
Tiger Brokers is known for offering some very attractive welcome offers like free stocks, up to 60 commission free trades, and rewards in the form of Tiger Coins.
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Although Tiger Brokers charges slightly higher minimum commissions than Interactive Brokers, Tiger is a very good way to save money if you make the most of their welcome promotions.
Tiger Brokers also doesn’t charge any inactivity fees, so you don’t have to worry about hitting a certain number of trades per month.
Keep in mind, however, that Tiger Brokers is still a newcomer with a limited choice of exchanges and a limited track record – while IBKR is one of the more established international brokerage houses.
Both IBKR and Tiger Brokers are more suitable for beginners than Saxo as they have virtually no minimum funding requirements, while Saxo requires an initial deposit of $ 3,000.
How do I start trading – IBKR Lite or IBKR Pro?
You can apply for an Interactive Brokers account through MoneySmart.
You will need to disclose information about your income, which you can easily do by logging into MyInfo with your SingPass.
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Once your account is approved, you can simply transfer funds via internet banking and start trading immediately.
Note that Singapore residents must use an IBKR Pro account.
The other option, IBKR Lite, is only for US residents. This is a simplified version of their trading platform that offers commission-free, unlimited trading in US stocks and ETFs. Unfortunately, Singapore residents do not qualify for IBKR Lite, so we must use IBKR Pro.
But I’m not a pro trader, protest!
Don’t let the name fool you. You don’t have to be a pro to use a Macbook Pro, and the same goes for the IBKR Pro platform. It’s just a regular trading platform that is “more complete” than the rundown IBKR Lite.
This article was first published in MoneySmart.
