Sick of working from home for a boss who’s using the pandemic as an excuse to increase your workload? Investing your money wisely can be your first step towards financial freedom and firing your boss.
But before you can trade your way to become an investing superstar (or not), you’ll need to open an investment brokerage account.
Interactive Brokers, also known as IBKR, is just one of many options open to you. Let’s see whether it’s worth considering.
What is Interactive Brokers?
Interactive Brokers is an American brokerage firm that also operates in Singapore. It is currently one of the US’s biggest trading platforms and also has a strong presence in Asia.
The company is listed on NASDAQ, so if you want to be really meta, you can even trade IBKR shares on your Interactive Brokers platform.
Interactive Brokers’ platform lets you invest in stocks, options, futures, currencies, bonds and funds on 135 markets in 33 countries, including our good old Singapore Exchange.
More importantly, it’s also one of the cheapest trading accounts available at the moment.
Interactive Brokers overview: fees, platforms & more
|Trading products||Stocks, ETFs, bonds, options, futures, FX, mutual funds, metals|
|Minimum commission fee (SG stocks)||0.08% (2.50 SGD minimum)|
|Minimum commission fee (US stocks)||USD 0.005 per share (1 USD minimum)|
|Minimum funding amount||None|
|Stock Holding Type||Custodian|
|Trading platforms||IBKR Lite, IBKR Pro|
|Payment method||Electronic fund transfer, wire, check, online bill payment|
|Inactivity fee||10 USD|
Interactive Brokers Singapore commission fees
For Singapore shares, Interactive Brokers charges a commission fee of 0.08%, with a minimum commission of 2.50 SGD.
IBKR’s $2.50 minimum commission for is one of the lowest in the market, with bank brokers like DBS Vickers or OCBC Securities charging as much as $25 per trade.
For small trades on SGX, Interactive Brokers is certainly cheaper than Saxo Markets, which charges a $5 minimum commission — but you can go even cheaper with newcomers like Tiger Brokers and Moomoo. Compare the cheapest brokerages for Singapore stocks here.
With IBKR’s low minimum commissions, you can go right ahead and make itty bitty trades without worrying about losing money to hefty commission fees.
However, be aware that you will be charged an inactivity fee if you have an account size of 100,000 USD or less and if you generate less than 10 USD to 20 USD worth of commissions in a calendar month.
Can you avoid the Interactive Brokers inactivity fee?
Probably the biggest drawback of Interactive Brokers is that they charge an inactivity fee unless you can fulfil certain criteria:
|Account net liquidation value||Criteria||Inactivity fee|
|< 2,000 USD||Monthly commissions must be at least 20 USD||20 USD minus any commissions paid|
|At least 2,000 USD but < 100,000 USD||Monthly commissions must be at least 10 USD||10 USD minus any commissions paid|
|100,000 USD and above||–||Waived|
If you can afford it, the easiest way to avoid the fee is to just make sure your account value is at least 100,000 USD.
Otherwise, if you have an account value of at least 2,000 USD, you’ll have to trade about 16,550 SGD worth of SGX stocks (based on the current exchange rate) in order to avoid paying any fee.
The inactivity fee doubles to a maximum of 20 USD if you have an account value worth less than 2,000 USD, and to avoid the fee you’ll also have to trade about 33,100 SGD worth of SGX stocks, which is probably not happening given your low account balance.
If you find yourself in this situation because you’re either cash-strapped or have lost money, it would be best to close your account until have more cash to pump into it.
Saxo vs Interactive Brokers — which is better?
Saxo Markets is another established online brokerage brand that is popular in Singapore, and is known for its affordable trading fees.
In terms of commission fees, Interactive Brokers is cheaper to use than Saxo Markets. IBKR charges much lower minimum commissions than Saxo, making it the cheaper choice for small and frequent trades.
If you’re more of a buy-and-hold investor, you’d probably want to opt for Saxo as they do not charge IBKR’s dreaded inactivity fee. You do, however, get charged an annual custodian fee of 0.12% on all your holdings with Saxo.
On the other hand, if you are a frequent trader and have no problem hitting Interactive Brokers’ monthly minimum commissions, OR are prepared to maintain an account value of at least 100,000 USD, then Interactive Brokers might well end up being cheaper.
Interactive Brokers vs Tiger Brokers — which is better?
If you’re a cost-conscious investor, then you’d have heard of Tiger Brokers. Though not as established as IBKR, Tiger Brokers is a new brokerage that has IBKR as one of their investors.
Tiger Brokers is known for dangling some very attractive welcome offers, such as free shares, up to 60 commission-free trades, and rewards in the form of Tiger coins.
While Tiger Brokers does charge slightly higher minimum commissions than Interactive Brokers, you might very well end up saving money with Tiger if you make the most out of their welcome promotions.
Tiger Brokers also does not charge any inactivity fees, so you needn’t worry about having to hit a certain number of trades per month.
That said, bear in mind that Tiger Brokers is still a new entrant with a limited range of stock exchanges and limited track record — whereas IBKR is one of the more established international brokerages out there.
Both IBKR and Tiger Brokers are more suited to beginner investors than Saxo, as they have practically no minimum funding requirements while Saxo requires an initial deposit of $3,000.
How to start trading — IBKR Lite or IBKR Pro?
You can apply for an Interactive Brokers account through MoneySmart.
You will need to divulge information about your income, which can be done quite easily if you log into MyInfo using your SingPass.
Once your account has been approved, you can simply transfer money via internet banking and start trading right away.
Note that Singapore residents will need to use an IBKR Pro account.
The other option, IBKR Lite, is only for US-based investors. This is a simplified version of their trading platform which offers commission-free, unlimited trading of US stocks and ETFs. Unfortunately, Singapore residents will not qualify for IBKR Lite so we’ll have to use IBKR Pro.
But I’m not a pro-trader, you protest!
Don’t be fooled by the name. 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 normal trading platform that’s more “complete” than the dumbed-down IBKR Lite.
Found this article useful? Share it with anyone who’s considering an IBKR account.