Chapter 7 — How to buy an ETF with Interactive Brokers?

Last updated:: March 17, 2023

Logo Interactive Brokers

In the last chapter, you learned how to convert your CHF into foreign currencies with Interactive Brokers in order to pay the lowest possible fees.

Now that it’s done, you’ll be able to buy your first ETF (or any other security, such as a stock or bond).

Investing in the stock market is one of the most important pillars of your FIRE adventure, because that’s what makes you invest your money to make it work for you, so that one day you can live off your passive income and officially declare yourself FIRE!

Except that when you face the Interactive Brokers user interface for the first time, it’s pretty impressive. And it might even block you from starting because you’re afraid of clicking in the wrong place and losing all the CHF you transferred there (I speak from experience ^^).

But don’t worry, that’s why I created this guide. If you follow it step-by-step every time, it will become child’s play, like it was the case for me.

Step 0: Know which ETF to buy before anything else

If you still don’t know which ETF to choose as a Swiss investor, then I recommend that you take a break and read these two articles:

Now that you know which stock or ETF you want to buy, let’s move on to the next section.

Step 1: Check how much free cash you have to know how many ETFs you are going to buy

Before submitting my stock market order, I always look at how much cash I have to know how many securities I’m going to buy.

Let’s take the most common example where I want to buy the VT ETF with the USD I converted in the previous chapter:

In the portfolio view (1) of Interactive Brokers, you can see at the very bottom of the page (under your ETFs and securities) the cash (2) you have at your disposal (here 4'129.50 USD)

The next piece of information I am interested in is the current price of a VT ETF’s share. To do this, you can look in two places on Interactive Brokers: either in the “Search” section or directly in the “Transaction” view.

Since we are here to buy, we will use the “Transaction” function directly:

Click on "Trade"

You will see this "Order ticket" panel open

Search for the security you want (1), here VT. Then click (2) on the security that corresponds to your search

And here we are with the VT ETF which is worth 97.24 USD (1) at the time of writing. The values in (2) and (3) are respectively the USD values if you wish to buy and if you wish to sell it

We now have all the elements in hand to know how many VT ETFs we can afford today:

N.B. for some time now, Interactive Brokers has been offering to buy fractional shares. Concretely, instead of saying a number of shares you want to buy (like 42 in our case), you tell them how much cash you have available, and the system will buy exactly that amount of ETFs. In our example, it would buy 42.45 shares of the VT ETF. In order not to complicate this guide and so that you know the basics first, I'm saving this for another blogpost.

Step 2: Buy your ETF on Interactive Brokers (finally!)

Here we are.

This is a key moment in the life of an investor. Because once you get through this stage, the money you’re going to earn is actually going to start working for you while you sleep or go about your business. Bye bye theory, it will now become your real life!

Here is an explanation of all the points in the image above on how to buy an ETF with Interactive Brokers:

IB tells me that I didn't use their market data (via their news on their platform) about the VT ETF, and that it's unconscious, and some more legal blah blah. I click "Accept" to continue placing my order

Second alert message from IB telling me that if my limit price is too low or too high, they can cancel my order to ensure a fair and orderly market. For the record, I've never been refused an order for this. So I click on "Accept"

And the last alert message that explains that if your order (with the limit you set) is not executed quickly, IB can take care of stopping it via its price management algorithm. No thanks, I click on "Do not use"

A little more legal blah blah with IB telling you that you can change the parameters concerning this price management algorithm in your settings. "OK", that's it now, can we move on?!?

And voilà, the VT ETF purchase order is now sent :)

By clicking on "Orders & Trades" (1), you can see that our order is being processed (2). Once it has been processed, it will go to the "Trades" section (3)

Maybe you’re wondering:

But Marc, why is my order sent, but not yet filled?

Very good question!

In fact, an order may not be filled for several reasons, such as the fact that your minimum purchase price is too low compared to the price that other sellers on the exchange are willing to sell for.

But in our case, the reason is even simpler: it’s because at the time I’m writing this article at 5am in Switzerland, the New York Stock Exchange is not yet open :)

And with a bit of patience (i.e. until it’s 9:30 am in New York City, when their stock exchange opens), this is what you will receive in your mailbox as a transaction notification from IB:

And here is the confirmation by email that our order to buy the VT ETF has been executed on Interactive Brokers

That’s it, congratulations, you’ve just bought your first ETF!!!

You can also go to the “Portfolio” section of Interactive Brokers, where you will see your new ETF.

You will also notice that I paid the VT ETF 97.7 USD, which is quite normal since I had set my maximum limit price at 98.65 USD.

There you go, now you know how to buy an ETF on Interactive Brokers.

In the next chapter, I’ll explain how you can see how much money you get back from your investments on Interactive Brokers (capital gains and dividend gains). This is a key element of your future FIRE life, because it is your investments that will finance your lifestyle :)

As usual, I only write and review things that I use in my personal daily life, or that I trust.

Thank you for reading!