Yesterday, some Interactive Brokers clients noticed some changes on their official website:
It looks too good to be true. But it really is.
Beginning 1st July 2021, Interactive Brokers have eliminated the monthly Inactivity Fees for all retail and adviser-client accounts below – regardless of the prior US$100,000 AUM.
This is big news for a lot of retail traders and investors who wanted to be on Interactive Brokers but were apprehensive due to this monthly inactivity fee.
What this Monthly Inactivity Fee is About
Prior to this change, if you go to the same page, you would observe this:
If the net liquidation value of your account is less than USD$100,000, IBKR will charge an inactivity fee of USD$10 a month (I am not sure why it called an activity fee haha)
If you made trades in the month, the commissions are net off from this $10, so IBKR do not double charge you.
If you are under 25 years old, they have a competitive inactivity fee of US$3.
But with this change, all these inactivity fees go away.
Who Benefits from this Monthly Inactivity Fee Elimination?
I think almost everybody benefits.
The traders benefit less. If you trade on the US stock exchanges under IBKR or IBSG’s Tiered commission structure, each stock trade would roughly cost you US$0.35.
It would take you 29 trades a month to equal that monthly inactivity fee.
It is that cheap.
But I think the biggest group of people that will benefit are the young, long-term, buy-and-hold, passive investors.
These young adults just started work and want to DIY and invest in just a few low-cost, broad-based, Irish-domiciled, tax-efficient exchange-traded funds (ETF), most likely listed on the London Stock Exchange.
Some popular ETFs are ETFs that track the MSCI World, MSCI All Country World, FTSE All-World, various factor and multifactor ETF, MSCI Emerging Market, MSCI World SmallCAP, Bloomberg Barclays Global Aggregate Bond, High Yield Bond Index, Semi-conductor Index, China Internet Stock Index.
As young investors, they are not sure if they would eventually accumulate to US$100,000. They are also unsure how suitable is Interactive Brokers before using it.
With this inactivity fee elimination, the biggest stumbling blocks have been eliminated and long term investors have a great platform for them to custodised their stocks long term.
The Advantages of Interactive Brokers Platform
I will try to list down why I think Interactive Brokers is a great platform to subscribe to:
- Easy to set up. With MyInfo, the fastest I heard is someone funding their account to be ready for trading in 2 hours. Everything is done online. You can follow my guide below.
- The commission is very competitive. Under Tiered pricing, my UCITS ETF cost worked out to be 0.056% a trade. My US stock trade cost like US$0.35.
- Near spot current conversion at a flat fee of US$2. Out of all the brokers out there, Interactive Brokers run their own treasury trading desk and the advantage is that you get a currency conversion very close to the spot. It is very easy to convert from SGD to USD, HKD, CNY, EUR, GBP. If you wanna speculate on currency prices, you could just convert to and fro.
- Many exchanges to trade on in one platform. Check out the full listing.
- You can trade options and other derivatives on it.
- It has a mobile application that allows you to trade and check your portfolio on the fly.
- No dividend handling charges and custodian charges.
- The notification informs you when there is a corporate action, or dividend is a deposit.
- Create a joint account (if you create a joint account, it will be on IBKR instead of IBSG)
- Margin rate currently at 1.65% p.a.
- Easily fund your account by local transfer from your DBS account to IBSG’s DBS account or through FAST transfer.
- Very comprehensive monthly report with Portfolio Analyst (about 30 pages). There are also ad-hoc reports.
- You can set up the account to automatically send daily reports and monthly reports to your email.
- For those who know how to program, you can make use of their API to program your execution.
- Many registered investment advisers, boutique funds, mini-hedge funds use Interactive Brokers to help their clients managed their money or trade for them. They probably stick with Interactive Brokers for a lot of good reasons.
- Interactive Brokers have been around for 40 plus years. They are listed and you can frequently take a look at their financial standing.
While there are advantages, there are some challenges as well. This would include that you have to purchase the live prices, you can argue other platforms provide more sophistication when it comes to options but I feel these are manageable challenges.
If you are interested, give Interactive Brokers a try today.
My Comprehensive Interactive Brokers How-to Guides
Interactive Brokers is a great low-cost brokerage platform that can be the standard broker for you to hold your long-term investments. You have access to various exchanges such as Singapore, the US, Hong Kong, London, European and Canada exchanges. Fully digital-first.
To get started or get familiar, you might want to check out some of my past articles on wealth building with Interactive Brokers. I hope it makes your life easier and brighter.