Interactive Brokers for dummies

[ajPT]

@cruzandmore

I had the exact same questions as you have.
This post - - -> https://retireinprogress.com/interactive-brokers-101/ helped me a lot. Once i only trade every 3 months i forget certain steps, i always read this post again, just to remember.
PS: Bons investimentos

Yes, I saw that one too
But I still prefer @Bojack approach of selling instead of buying (don’t like to have to do calculations to check the amount I can buy).

PS: Já somos pelo menos 3 portugueses por aqui, estamos a crescer

[cruzandmore]

i did not tried that way yet. Seems to be quied a recent option right? But did it work out for you that way? Do you still get charged 20 CHF instead of 1.99 CHF?

[arch]

If you are trading once in a while why not use the mobile app? Its quite simple and straight forward.

[ajPT]

@cruzandmore

i did not tried that way yet. Seems to be quied a recent option right? But did it work out for you that way? Do you still get charged 20 CHF instead of 1.99 CHF?

I managed to do it successfully the way @Bojack said and paid 1,97 CHF commission to convert my CHF to USD.

Basically I’ve put the full amount I wanted to convert and pressed “preview order” to check the commission. There, it said the commission will be 1,97 CHF for the amount I wanted to convert, so I modified my order to subtracted this commission (tbh, I subtracted 5 CHF to be on the safe side, but then 3 CHF stayed in my account).

This was the way I’ve found to not have negative CHF balance.

PS: The 20 CHF fee was on the test account while trying to convert 1 million.

[dbu]

Hi all,

I have a question as well on purchasing USD for CHF.
First time I did it I followed Bojack’s approach, with using FXCONV instead of IDEALPRO, through TWS interface.
Once performed, I had no visible entries for USD.CHF pair in my portfolio.

However when I went to convert to USD through my phone for the second time, I believe only IDEALPRO was available.
After I used that method, USD.CHF pair showed up under my positions.

Now my questions are:

1. Any disadvantages when using IDEALPRO vs FXCONV? (e.g. if I want to trade while on the move, away from my laptop)
   –> Self-answered (as I see now that it has been addressed earlier in this thread; and further explained here): No, it just seems to create a virtual FX position. Useful if you want to track evolution of your CHF-USD pair.
2. Is it actually beneficial, if it’s necessary for future tax reports to have that USD.CHF pair reported, for profits/losses?

Thanks and happy new stashing year everyone!

[Bojack]

Guys, if your account base currency in USD, then of course you don’t want to keep any CHF on this account. That’s why I wrote my guide. You sell all the CHF you have, so you know the exact amount of CHF that you want gone. The fee is then charged in USD.

However, if your account is in CHF then it’s nice to keep some CHF on the account, for fees.

why would you chose CHF as base currency though? all your ETFs are anyway in USD, you sure you want to track your performance in CHF? The dividends from ETFs also come in USD. The account management fee is 10 USD. Etc.

@cruzandmore

Do you still get charged 20 CHF instead of 1.99 CHF?

In his example he got charged 20 CHF, because he exchanged 1’000’000 CHF (one million). The fee is 0.2 * 0.0001 * trade value, but no less than 2 USD.

[dbu]

@Bojack

why would you chose CHF as base currency though?

Maybe for this part?
“Your base currency determines the currency of translation for your statements”

Have no idea if necessary though, haven’t had a chance to have to provide anything for tax authorities or such yet. Do they perhaps require values in CHF?

---

Edit: further reading here points to a couple more reasons.
Maybe the most important one: sending CHF inbound?

[Bojack]

@dbu

Do they perhaps require values in CHF?

No, they require values in the currency of the ETF.

@dbu

Edit: further reading here points to a couple more reasons.
Maybe the most important one: sending CHF inbound?

I have read this thread and for the most part people are just writing nonsense there. And where did you read a reason why is it good to have base currency equal to your bank account, from which you are sending the money? I send money from CHF and my base currency is USD. What’s the problem with that?

[dbu]

I thought the base currency might determine the IBAN that gets generated when you request a deposit.

Good to learn none of the above makes sense, thanks for correcting.
I just referenced what I found, don’t have as direct a knowledge as you guys.

[Bojack]

@dbu

I thought the base currency might determine the IBAN that gets generated when you request a deposit.

The IBAN depends on the currency that you want to send, you explicitly select the currency before you get the IBAN. You think you can only send your base currency? No, you can send any currency you want, from any place you want. Provided that the account is in your name. At least that’s how I understand it.

[ecthe]

Hello there, I would have two questions regarding IB account.

The first one would be about the base currency. I see that some people here (e.g. Bojack) have USD as their base currency. However, after reading this, I do not understand the logic behind it. Especially since:

“For purposes of an IB account, each client will specify at the point of application a single Base Currency which will determine the currency of translation for statements and the currency used for determining margin requirements.”

Should make it easier for Swiss resident to have CHF as base currency to have statements in CHF for tax filling purpose.

On the other hand, I guess that since I plan to mainly have US domiciled funds, USD might make sense to have USD. In the case of dividends, are thy automatically converted to your base currency or stay in the fund’s one?

Second one would be about the account type. There is Margin, Portfolio margin and Cash. If I understand properly, cash only allow to trade if you have enough cash in the currency your trade is and margin allows you to loan money if you don’t have enough. However, I do not get what is portfolio margin. I would think that it allows you to buy if you don’t have enough cash such as margin BUT you have to have the loaned amount in term of stocks, bonds etc. in the currency you want to trade in. Would that be correct?

Thanks in advance.

[San_Francisco]

@ecthe

In the case of dividends, are thy automatically converted to your base currency or stay in the fund’s one

They are not converted. You can hold multiple currencies on the account.

@ecthe

Should make it easier for Swiss resident to have CHF as base currency to have statements in CHF for tax filling purpose

Not sure if and how it’d make it much easier. USD-denominated assets are still USD denominated. Strictly speaking, I think you’d be obliged to use the exchanges rates published by the federal tax administration (instead of the one your broker might use) for income tax purposes. For any equity listed in their database, the tax software should do all the calculation, once you’ve entered buy and sell dates and amounts.

[ecthe]

Thanks for your answer. Then I am wondering why some people here have USD as a base currency. So if any of them passes by, I am happy to have some explanation.

[San_Francisco]

I’m currently having USD as a base currency. To be honest, it’s pretty much a wash in my opinion.

With most of my trades at IBKR being in USD, USD seemed a logical choice. Also, I’ve also held investment/brokerage account primarily in foreign currency (EUR), so I’m used to handle foreign currency for tax returns. I just enter the individual stock positions and cash balances (separately, by currency) on my tax return.

Right now, my account is hovering around the 100k USD minimum for monthly fee waivers, so leaving it in USD is easiest for me to keep tabs on that.

[ma0]

I have it in CHF since “my world” is in chf. I still see the prices in USD and see how they moves.
The biggest thing for me is to see/compare Deposit/Withdrawal amounts with the actual value of the account.

[Mustachioed]

Here’s what @Bojack wrote in a separate thread:

@Bojack

My logic is: all the instruments that I will hold there (VT, VTI, VXUS, you name it) are in USD. So I need USD to buy them. They will also pay out dividends in USD. It just seems easier to track everything in USD. Once retired, I will withdraw maybe PLN, maybe EUR, who knows.

I don’t think your base currency makes a difference when it comes to taxes.

If you invest only in US-domiciled funds, then I think it makes sense. But in the grand scheme of things, to Bojack’s point, it really doesn’t make a major difference and can be switched on the fly.

[element532]

Hello everyone,

I am a longtime lurker in the forum and finally created my InteractiveBrokers (IB) account. I followed the steps outline in @Bojack’s post. Transferred CHF and converted to USD. When I execute the trade (buy order for VTI in USD), I can see that an amount is show in equity with loan. Could you please explain how IB determines equity with loan? I have sufficient USD balance to cover the buy order.

[weirded]

I think you can find the answer here:

https://www.interactivebrokers.co.uk/en/index.php?f=709

Forex transactions usually settle in 2 business days -> before this happens, your available cash is the “equity with loan” amount

[Double_A]

@element532

I can see that an amount is show in equity with loan

That’s the amount of “spendable value” that you will have left after this Order gets filled. In a Cash account thats the amount of settled cash that you have. See here.

You probably had 2945 USD in your account, and now want to buy VTI in the worth of 2803 USD… leaving you with 142 USD (or CHF? I’m never really sure, especially with the almost 1:1 ratio of USD:CHF ).

It can help you see if you are buying the correct amount. E.g. on a Cash account if you wanted to spend all your money on VTI, and that number was e.g. 160 you could have bought one more share.

[element532]

@Double_A and @weirded Thank you both for the clarification. I have a Cash account at IB and was not aware that USD.CHF FX settlement takes 2 days.