Interactive Brokers Basic Guide: How to start DCA investing

[Music] Let's talk about Interactive Brokers  and how to start dollar cost average investing  

with it. You see, I have been mentioning  about Interactive Brokers many times on this  

channel and I have personally used them since  2021. But I understand that for some of you,  

you all may face some challenges in setting up  Interactive Brokers or the user interface is  

not that beginner friendly. So, for those new  beginners, may be taken aback and, you know,  

be apprehensive on using this platform, which  is why I'm creating this video today to help all  

the newcomers to get familiar and what to do for  essential steps to start your investing journey.

And if you were to ask me what are the  reasons for using Interactive Brokers,  

I'll just give you three very simple reasons.  Number one is the superior foreign exchange rates,  

because I've never seen any other broker that  offers as good and competitive interest rates as  

Interactive Brokers, which is very close to zero  spread. Number two is global market access. Other  

than just Singapore, US, or Hong Kong stocks,  which is very common among trading platforms,  

Interactive Brokers do offer worldwide coverage  including markets in Europe, markets in Japan,  

even Malaysia, Australia, Middle East. You  name it, you got it. And number three is low  

cost pricing, from 35 US cents per order for US  stocks or ETFs, and that may be the lowest cost  

today. And that is an all-in fee inclusive of  any platform or commission charges because some  

brokerages do offer zero commission but they  do charge a platform fee for you to use them.

But I guess for most of you who  have clicked into this video,  

you will probably know why you want  to use Interactive Brokers. But the  

question is how to use Interactive Brokers,  which is what we're going to answer today.

And as we all know, Interactive Brokers  has a ton of features — like maybe too  

much — and some of it you may not even  know what is the use for. So we will  

skip all that. We will just focus on the  essential features for this video because  

we just want to focus on what truly matters  — on what is helping you do a buy trade or  

recurring buy order to set up your RSP  for dollar cost averaging investing.

Step one, open an Interactive Brokers  Singapore account. So you can either click  

on my IBKR link or IBSG link. The links  will be placed in the description below,  

or you can scan the QR code right here. And  remember that this video is not sponsored — it's  

really my own honest thoughts to take some  time and really handhold you through this  

beginner process. And if you want to support this  channel, even if you already have an IB account,  

just scan the QR code right here. You  will support me financially, thank you.

And for the registration process, I shall  not walk through because it is very standard,  

very SOP-like. Make sure you  verify with your Singpass,  

especially if you are a Singapore resident —  that will make things easier. But otherwise,  

if you're a foreign investor with no  Interactive Brokers presence in your country,  

just try to sign up and submit your particulars  and hopefully it will work out for you.

Step two, we will need to configure the account  and settings. I know this is not normal of any  

other trading platforms, but let's do it. After  you log in to your Interactive Brokers homepage  

on the website, go and search for "account  type". Then you need to select either margin  

or cash account. Margin account means you  can borrow funds to trade or, you know,  

perform your options trading activity. And then  cash account is more like a cash upfront — you  

will need to fund your account otherwise  your trade will not be executed. So margin  

simply means you are allowed to borrow money from  Interactive Brokers and then execute your trade.  

Then cash is you cannot execute a trade without  having sufficient funds. If you prefer safety,  

go and choose the cash account. But if you  prefer to have some leeway or leverage,  

or sometimes your cash cannot come in fast enough,  then choose margin. This is entirely up to you.

Next up, you want to search for "base  currency", and this will help you set your  

home-based currency to whether you want  it in SGD — Singapore dollars — or USD,  

or whatever home currency you are  in, alright? So that really depends  

on personal preference. I have set it  to SGD for better accounting purpose.

Next, you want to search for "permission",  because you want to activate your permission  

for all the following investment products  plus what country you want to invest in.  

Then there are some other investment or trading  products that may interest you — go and select  

all those that you want access. But most  importantly, select the global markets and  

fractional shares because this will enable you  to have the maximum efficient trading order.

One last thing is "pricing", so search  for pricing and select IBKR pricing  

plan. Select tiered pricing for better  rates for smaller size order compared to  

fixed. So once you've done all these  account configuration and settings,  

I guess your initial setup is considered  completed. And to me, essentially this is  

the hardest part of Interactive Brokers already  because the rest of the following of the video  

will be just simple steps and what you will  be familiar with like other trading platforms.

So if you have further questions, just go and join  me at over 20,000 members at Honey SG Telegram —  

um — for those people who are like-minded  in investing and find your community there.

So moving on to the next step, step three, you  want to fund the account. Now go through two ways,  

one for SGD and one for USD. For  SGD, click on "Transfer and Pay",  

then "Transfer Funds", "Deposit  Funds", use a new deposit method,  

then select SGD and "Instant Local Transfer" via  eGIRO. And the process will bring you through the  

eGIRO setup with your bank. You just have to  log in and authorize it. So eGIRO is like an  

instant transfer option because once your eGIRO  payment has been set up, just make sure that you  

have sufficient funds in your eGIRO bank account  and activate it via Interactive Brokers deposit.

Example, if I just want to deposit $3,000,  it will automatically withdraw $3,000 from  

my linked eGIRO bank account and I don't even have  to log in. It's automatic and will come within 30  

seconds. So this is even faster than some other  trading platforms out there — I'm sure of that.

For USD deposits, it is quite different. So  instead of selecting SGD from the usual steps,  

you go and select USD. But USD got no eGIRO,  right? Because eGIRO is a Singapore thing. So  

you have to select wire transfer and use your DBS  Multi-Currency Account details. For the best DBS  

Multi-Currency Account, I guess you can go with  a no-fee one like DBS My Account. That's what I'm  

using — no minimum deposit and no fall-below  fees. And the good thing is because it is a  

Multi-Currency Account, it offers free transfer  in USD. So once you have filled up your DBS My  

Account details, um, similarly just make it a  new deposit method and follow the instructions  

from Interactive Brokers and transfer US dollars  from a DBS My Account to Interactive Brokers'  

USD account. My experience is that if you  transfer before 4:00 p.m. on a workday,  

it will arrive by 8:00 p.m. on the same day  — so just in time for your US time to trade.

Moving on to step four, let's talk about currency  conversion. If you want to trade in USD but you  

only have Singapore dollars, how are you going  to work around it? That is where you need to  

click on "Trade", then "Convert Currency".  So it's really very simple to use. Example,  

if I want to convert SGD to USD, I just put in the  amount that I want and I click "Preview" if I just  

want to check out what are the fees and exchange  rates. Do know that there is a conversion fee of  

$2 US converted to your local currency. So I  don't really use this feature unless I want  

to convert a huge amount of money. For example,  $5,000 — then I will use the manual conversion.

Moving on to step five, which is the important  one — how to buy a stock or ETF. So you need  

to use the search function on IB again. Just  search for your favorite ticker — for example,  

CSPX, which tracks the S&P 500 ETF and  that is listed on London Stock Exchange.  

So it offers some tax advantage in terms of the  withholding tax. Then you want to click "Buy".  

You can select your quantity in either  shares or dollar amounts. For order type,  

you may select "Limit" or "Market" order.  Limit is more like you set the price that  

you want to execute at. Market is just  you take the market price of whichever  

this current stock or ETF is at. For good  practice, always click "Preview" to make sure  

you know what you're buying and after that,  you confirm, you go and click "Buy Order".

Step six, how to do a recurring buy. So  that is more for regular savings plan to  

dollar cost average into the market. So using my  previous CSPX example, instead of clicking "Buy",  

you need to click "Recurring", and that will  lead you to a page where you can set up your  

recurring investment order. Like most other  RSPs, you need to select your start date,  

your amount, your interval, and your  end date for the specific ticker.

Now after you have set up this recurring  buy order, it is very important that you  

make sure you have sufficient funds  in your Interactive Brokers account,  

otherwise your trade will not be executed.  And it's always recommended that you place  

your funds one day before your trade executes,  otherwise, um, there may be some problems.

Now the good thing about using this recurring  buy trade order from Interactive Brokers is that  

it will not incur currency conversion fees if you  just place like your local currency inside even if  

you do not have US dollars, okay? This is tested  and proven over the past one year that I use it.  

So what it means is that if your RSP order is  $1,000 US of CSPX and maybe you place $1,500 SGD  

in your IB account, um, you have zero USD dollars  — the trade will still execute because IB will  

automatically convert $1,000 worth, um, deducting  from your SGD balance to make that trade execute.  

So you save on the $2 currency conversion fee and  that's what I like about it. It's truly passive.

So after the trade order, I guess you are done  with the full tutorial. If you just want to sell  

your positions, I don't think I need to teach you  anymore, right? Just click the reverse steps. Then  

for cash withdrawals, just add your bank account  and withdraw to your specified bank account. Okay,  

all these don't need to teach really.  I'm sure if you know how to add all  

these bank account details and execute your buy  order, you know how to do the reverse, right?

So yes, these are just some basic and essential  steps on how to use Interactive Brokers. Don't  

need to go so long-winded. No need to know every  single feature, because Interactive Brokers may  

be very sophisticated and complicated to some  of you. So hopefully this beginner and basic  

essential guide will help you navigate  through the very complicated user interface  

of Interactive Brokers. Really, you just  need that few steps — don't need to look  

at the whole tutorial. And I'm very sure once  you're familiar with the website function,  

the mobile app on Interactive Brokers  will not be too difficult for you. It  

is just a replica of the website version —  a more toned-down one and simplified one.

So remember, if you want to sign up for  Interactive Brokers, do consider using my  

link or just scan the QR code for good karma. And  if you want to learn of the best ways to invest  

in S&P 500 to track the US index using cash, CPF  or SRS, do refer to my previous video right here.