Last updated: November 16, 2024
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 (Financial Independence, Retire Early) 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!
The most scary thing for most beginners is once you log into the Interactive Brokers user interface for the first time, it can be quite intimidating. And it might even make you reconsider starting because you’re afraid of clicking in the wrong place and then 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: Decide which ETF you want to buy
If you still don’t know which ETF to choose as a Swiss investor, then I recommend that you read these two articles first:
- How to build a Mustachian Boglehead’s portfolio
- In which ETFs I would invest CHF 10'000 if I started today
Now that you know which stock or ETF you want to buy, let’s move on with the next step.
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:
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:
- USD cash available: 4'129.50 USD
- Purchase price of one ETF VT share: 97.29 USD
- Total number of shares we can afford: 42 (because 4'129.50 / 97.29 = 42.445266728)
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 the summary of all the steps you need to do to buy an ETF on Interactive Brokers:
- 1: Decide which ETF (stock or bond) you want to buy
- 2: Select buy (unless you want to sell one of your shares, because it happens in the same “Trade” tab)
- 3: Enter the quantity of VT ETF shares you wish to buy (notice how it is 41 instead of 42, because between the time I started this article and the time I finished it, the price of the VT ETF has increased ;))
- 4: as I explained in the yellow box above, we want to buy “entire” shares (and not just indicate an amount of cash to buy 41.YXZ fractions of shares)
- 5: Select the desired order type. Personally, I only use the “Limit” type to say how much I am willing to pay for a share at maximum (here 98.65 USD)
- 6: Then you must indicate the validity period of your transaction order. I now always use “Good Till Cancel (GTC)” which means that the order is valid until it is executed, unless I cancel it myself. As you can see, you can also make it valid for one day only, or until the next opening of the stock exchange
- 7: FINALLY! You will click on “Submit” to submit your order on the stock market. That’s where everything will happen :) So, take a deep breath, and click!
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?!?
By clicking on 'Orders and 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 :)