A lot of successful investors will tell you: your broker is your biggest enemy. And it is true that as you trade, fees accumulate. However, picking the right partner can be key to your investment strategy and here is why.
A broker with low trading fees enhances your return and lets you participate in more opportunities: since the cost of trading shares is one of the parameters to determine the return you make from an investment, higher trading fees will mechanically decrease expected ROI. And since you should not go for investment returns that are below your minimum expected ROI, the universe of potential opportunities diminishes as the money you pay to your broker goes up. Interactive Brokers has the lowest fees I have ever seen (I’ve tried a few brokers). Most of the time, I pay a commission of US$1.00. In certain cases (when the number of shares traded is important), this fee can increase but it always remains reasonable. What’s more, if you’re a regular large trader, Interactive Brokers has you covered by proposing a high volume pricing tier.
A broker with great execution will let you buy securities at the best price: however, price is only one of the dimensions to consider. Another great thing about Interactive Brokers is the many order types that you can choose from when buying a security. Of course you can place a limit, market or stop order, but there is actually a dozen other possibilities that I’ve never seen offered by any other broker. Some of those options, such as the trail order, are really neat to buy and sell while taking advantage of a stock’s momentum (the SELL stop price follows (trails) the stock if it’s on its way up so that you leave as little money on the table and vice versa for a BUY stop price, which allows you to buy at a lower price if the stock is going down).
A broker offering flexible margin increases your investment power: last but not least, Interactive Brokers has a proprietary way of determining how much you can buy on margin. By default, your account will be cash (no margin), but if you configure it as a margin account, Interactive Broker’s algorithm will determine how much cash you are able to borrow based on the securities in your portfolio. It is of course recommended to keep some wiggle room in order to avoid any automated margin call. Used wisely, margin is a great way to get more bang for your bucks.
Conclusion: In my view, whether you’re a beginner or a pro and whatever you’re trading, Interactive Brokers is the way to go, as its cost efficiency, ease of use, and the breadth and depth of its features cater to all levels. You can log on from any device and security is top notch. You could be using the platform at 10% of its capacity for the rest of your life and still be happy with it, or decide to polish your game and benefit from the same tools and functionalities than institutional traders. Interactive Brokers also has an impressive knowledge base covering hundreds of topics for you to use as a reference, which has proven handy time and time again.
If you want to give these folks a try, follow this link and open your account online within a few minutes.