One of the most popular things to do nowadays is to buy shares in a company. A lot of people prefer to invest in companies and buy shares directly rather than transfer funds to a broker, because it is a good way to learn more about the companies themselves and to keep your personal information out of it.
In this blog post, we compare two investment platforms and try to figure out who is cheaper for the European investor at the end of 2021, the long run. We do this by comparing the costs of the platforms, i.e. the costs of trading and the costs of the services.
(Disclosure: some of the links below may be affiliate links).I have already compared Interactive Brokers and DEGIRO for different cases. However, I only looked at a portfolio weighted by US ETFs. However, for many investors in Europe, it is currently not possible to invest in these ETFs due to PRIIPs. This set of investment rules came into effect in 2018.
Currently, Swiss investors can still invest in the US ETF with IB. But it can’t last long. Once this changes, we will face the same problem as European investors. An alternative is to invest in European ETFs.
The two cheapest brokers in Europe are DEGIRO and Interactive Brokers. So if you can’t invest in US ETFs, you should use DEGIRO instead of Interactive Brokers?
We will find out by comparing the two using a portfolio of European ETFs. We will only compare the cost of the two brokers, but not for example the features and usability.
Our investment portfolios
For this comparison of brokers, we will look at two different portfolios.
Since fees will not change, we are not interested in the specific ETFs used. We are only interested in the exchange on which the ETFs are purchased. As for ETF selection, I’ve written about possible portfolios of European ETFs. You can read here why we are forced to invest in European ETFs when we could lose access to excellent US ETFs.
The first portfolio is for the Swiss investor. This investor has 25% of his portfolio in a Swiss ETF (from the SIX exchange). And the rest of the portfolio consists of the European ETF (from Euronext Paris).
Our second portfolio, for the European investor, is even simpler. This investor holds 100% of its portfolio in European ETFs (listed on Euronext Paris).
In both cases, each investor invests in an ETF only once a month. This is a great way to invest with low commissions. Some people invest every quarter. But this hardly reduces the cost and forces you to keep more money behind. Investing monthly is also a good way to get into the habit of investing. So monthly investments make more sense.
For these two investors, we will compare the prices of the two brokers: DEGIRO v. Interactive Brokers. These two brokers are the cheapest in Europe. But who is most favorable for each scenario? We’re gonna find out!
DEGIRO Duties
First, we need to look at the rates for each service. Let’s start with DEGIRO. DEGIRO has two different accounts: Basics and preservation. There are a few others, but they are not relevant to normal investors. So we will focus on these two.
The difference between the accounts is that DEGIRO can credit your shares if you have a basic account. If you have a brokerage account, they can’t lend you shares. However, you must pay an additional fee.
Regardless of the account you use, you must pay a 2.5 EUR (CHF 2.68) annual connection fee for each stock exchange where you hold shares. If you have an ETF on SIX and another on Euronext Paris, you pay 5 euros per year.
When you exchange the currency in your account, you pay a commission of 0,10%. This can quickly become expensive if you are investing a large amount of money. This is the case if your base currency is the Swiss franc and you need to buy an ETF in euros.
DEGIRO’s fee system is quite simple. Unfortunately, it varies somewhat from country to country. I want DEGIRO to have the same prices no matter what country you are from.
There are also a number of ETFs for which no transaction costs are charged at DEGIRO. You may still have to pay an exchange fee. However, there are no additional costs involved. We will not use it for this comparison as it would significantly limit our choices. But if you choose an ETF from the free list, you can do it much cheaper.
Basic Account
With DEGIRO Basic, the Swiss investor pays €2 (CHF2.15) and 0.03% of the transaction value for each purchase of the Swiss ETF. And the price is the same (EUR 2 (CHF 2.15) and 0.03%) for the European ETF.
As far as European investors are concerned, I will take the example of the French company DEGIRO. Costs vary somewhat from country to country. If you are not in France, you can consult the rates on the DEGIRO website.
This investor pays €2 and 0.02% for each purchase of a European ETF. The Swiss ETF will have the same price. But European investors are unlikely to invest in Swiss ETFs. Interestingly, for the Swiss investor, it is slightly cheaper than an investment.
Deposit account
With the DEGIRO deposit account, the transaction costs are the same as with Basic. However, you will have to pay a commission when you receive the dividend. For each dividend you pay 1 euro and 3% of the dividend. In our simulation we assume a dividend yield of 1.8% and a quarterly dividend.
Interactive brokerage
Now we also need to look at the cost of Interactive Brokers. They don’t have two types of accounts, but they do have two fee systems: Fixed and staggered. So we will compare the two. Apart from prices, there are no other differences between the two price systems.
You pay the same contributions no matter where you live. This makes the payment process a little easier. In either case, there are no storage or inactivity fees!
For both account types you pay a USD 2 (CHF 2) exchange fee. Swiss investors will have to exchange some Swiss francs into euros to buy European ETFs.
Fixed price
Interactive Brokers’ fixed prices are simple.
To buy an ETF on the Swiss stock exchange you pay 0.10% of the total transaction amount. The minimum charge is 10 Swiss francs. There is no maximum rate.
You also pay 0.10% to buy an ETF on the European stock exchange. However, the minimum charge is only EUR 4 (CHF 4,28) and the maximum charge EUR 29 (CHF 31,05).
Multi-level pricing
Interactive Brokers’ multi-tiered system is incredibly complex.
Firstly, you must pay a transaction fee to the IB in each region. Then, depending on the exchange, you have to pay certain commissions. And they’re very different, depending on the fair.
If you buy an ETF on the Swiss exchange (I took EBS), you pay a transaction fee of 0.05% to IB (with a minimum of CHF 1.5 and a maximum of CHF 49). In this case you pay a fixed rate of CHF 1.5 per bill of exchange and a foreign exchange commission of 0.02%. In addition, you pay a clearing fee of CHF 0.55 and a transaction reporting fee of CHF 1.
When you buy an ETF on the European stock exchange (Euronext Paris), you pay 0.05% IB transaction fees, with a minimum of EUR 1.25 (CHF 1.34) and a maximum of EUR 29 (CHF 31.06). You pay a foreign exchange commission of 0.01% (with a minimum amount of € 0.8). And the clearing fee will be €0.1.
We see that it is much cheaper to trade on Euronext than on SIX. Switzerland has the reputation of being an expensive country!
As you can see, this system is much more complicated than the fixed system. But you don’t have to worry about that. I’ll figure it out for you!
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Swiss investor – Switzerland / Europe Portfolio
Let’s start with our Swiss portfolio, which consists of 25% Swiss ETFs and 75% European ETFs. In this case, the investor in our example would invest in a Swiss ETF once every four months and in a European ETF the remaining months. The base currency for Swiss investors will be CHF. This means that buying a European ETF involves a currency conversion.
This is the portfolio in which most Swiss invest. If you don’t need Swiss ETFs, skip to the next section, where you’ll find a complete portfolio of European ETFs. However, the following chapter uses the euro as the base currency.
For this Swiss investor, we will compare DEGIRO with Interactive Brokers in different scenarios.
Starter
Our first scenario is that of a person starting to invest. The investor starts with CHF 25,000 and invests CHF 1,000 each month. This is a typical scenario for someone investing in the stock market for the first time. But this is just one example. It is not a problem to start with zero CHF.
The detailed results of this scenario are as follows:
DEGIRO vs Interactive Brokers for a potential Swiss investor
And here are the total costs for each trading account:
- DEGIRO Basic : 43.76 CHF
- DEGIRO Guard : 65.48 CHF
- Interactive Brokers Fixed : 86.52 CHF
- Interactive Brokers Staggered : 52.35 CHF
In this case, DEGIRO Basic is only slightly cheaper than Interactive Brokers Tiered, but the difference is not very big. We see that the DEGIRO Basic account is already considerably cheaper than the deposit account, even with a small portfolio.
So in this particular case, DEGIRO Basic and Interactive Brokers Tiered are the best options.
Standard investor I
For the second scenario, we can take an investor with CHF 100,000 who invests CHF 2,000 each month. After a few years of investing, many investors reach exactly this state.
This scenario leads to the following results for different brokers
DEGIRO vs. Interactive Brokers for a standard Swiss investor
Here again are the total commissions for each trading account:
- DEGIRO Basic : 56 CHF
- DEGIRO Guard : 122 CHF
- Interactive Brokers Fixed : 87 CHF
- Interactive Brokers Staggered : 53 CHF
Interactive Brokers Tiered is now cheaper than DEGIRO Basic. We also see that the DEGIRO deposit account is starting to grow as we receive dividends.
Therefore, in this particular case, Interactive Brokers Tiered is the best choice. However, it is only slightly cheaper than DEGIRO Basic. Both are perfect for this scenario.
Standard Investor II
Let’s see what happens if we invest CHF 5,000 each month instead of CHF 2,000. This is another typical investment case.
DEGIRO vs. Interactive Brokers for a standard Swiss investor – CHF 5000 per month
In this scenario, we obtain the following totals:
- DEGIRO Basic : 94 CHF
- DEGIRO Guard : 170 CHF
- Interactive Brokers Fixed : 93 CHF
- Interactive Brokers Staggered : 68 CHF
We see that Interactive Brokers is still the best option here. But we also see that the gap between tiered and fixed prices is no longer so wide. DEGIRO Basic becomes expensive because of the switching costs. And the deposit gets expensive because of the commissions on dividends.
Also in this particular case Interactive Brokers Tiered would be a better choice.
Advanced Investor
Let’s look at the last scenario for our Swiss investor. This time our investor has CHF 500,000 and invests CHF 10,000 per month. It’s not a typical scenario, because there’s a lot of money at stake. But it’s still possible.
DEGIRO vs Interactive Brokers for an advanced Swiss investor
In this case, we obtain the following results:
- DEGIRO Basic : 157 CHF
- DEGIRO Guard : 469 CHF
- Interactive Brokers Fixed : 138 CHF
- Interactive Brokers Staggered : 100 CHF
Little has changed in this scenario. We can see that the gap between the different options is widening. An installment bill is still the best option. DEGIRO Basic is now more expensive than Interactive Brokers Fixed. Childcare is too expensive now, about three times as expensive as DEGIRO Basic.
In this case, Interactive Brokers Tiered is the cheapest option. But if you invest 10,000 CHF per month, the difference with DEGIRO Basic is very small!
Conclusion Swiss investors
The best broker for Swiss investors
Interactive brokers
Interactive Brokers is an excellent stockbroker with extremely low commissions! Trade in US securities for as little as USD 0.5!
For Swiss investors, we can draw several conclusions:
- Interactive Brokers Tiered is the cheapest account if you invest more than CHF 2,000 per month.
- The difference between Interactive Brokers Tiered and DEGIRO Basic is quite small.
- For a smaller portfolio or small monthly investments DEGIRO Basic is the cheaper option, but only slightly cheaper.
- The DEGIRO deposit starts to increase as your portfolio grows and generates more dividends. You can consider Interactive Brokers if you don’t want your broker to lend you shares.
- Most of DEGIRO’s commissions come from currency trading.
But since only Interactive Brokers offers access to US ETFs, it has a big advantage anyway. For Swiss investors, I recommend Interactive Brokers.
European investor – Europe ETF portfolio only
If you live in Europe, chances are you have a portfolio of exclusively European ETFs.
In this case, the investor would invest monthly in a European ETF. This is a simple scenario. Since the European investor will have euros at his disposal, he will not need to convert currencies in this scenario. This will make a big difference!
This should worry most European investors, with the exception of Swiss investors. This may also be different for people living in the UK who do not have a euro.
Some DEGIRO prices vary from country to country. For this example I took prices from France. The fee for ETFs will be changed from €2 and 0.03% to €2 and 0.02%. At Interactive Brokers, it doesn’t matter where you’re from.
For this European investor, we will compare DEGIRO with Interactive Brokers under the same scenarios as above.
Feed starter
Our first scenario for someone starting out in investing. The investor starts with 25,000 euros and invests 1,000 euros every month. This is a typical scenario for a European starting to invest in the stock market.
The detailed results of this scenario are as follows:
DEGIRO vs Interactive Brokers for a potential European investor
And here are the total costs for each trading account:
- DEGIRO Basic : EUR 29
- DEGIRO Guard : EUR 50
- Interactive Brokers Fixed : EUR 48
- Interactive Brokers Staggered : EUR 25
It is interesting to note that Interactive Brokers Tiered is already cheaper than DEGIRO for a small portfolio, but only by a small margin.
So, in this case Interactive Brokers Tiered Basic is the best option, and DEGIRO Basic is a good second.
Standard investor I
Our second scenario involves someone in the second phase of the investment. The investor already has a portfolio of €100,000. This standard investor invests 2,000 euros per month.
The detailed results of this scenario are as follows:
DEGIRO vs. Interactive Brokers for a standard European investor
And here are the total costs for each trading account:
- DEGIRO Basic : EUR 31
- DEGIRO Guard : EUR 97
- Interactive Brokers Fixed : EUR 48
- Interactive Brokers Staggered : EUR 25
Interactive Brokers is also a very interesting option. Interactive Brokers’ Tiered Account is the cheapest. But the difference with DEGIRO Basic is minimal. On the other hand, DEGIRO’s healthcare account is getting expensive.
Interactive Brokers Tiered is the best option for this particular case, the DEGIRO Basic is a very close second.
Standard Investor II
Let’s see what happens if this standard investor invests €5,000 per month instead of €1,000.
DEGIRO vs. Interactive Brokers for a standard European investor – EUR 5000 per month
This results in the following commissions for the brokerage account:
- DEGIRO Basic : EUR 39
- DEGIRO Guard : EUR 114
- Interactive Brokers Fixed : EUR 60
- Interactive Brokers Staggered : EUR 40
With a difference of only €1, DEGIRO Basic and Interactive Brokers Tiered are both excellent options. The fixed price also remains very correct at Interactive Brokers. However, DEGIRO Custody now costs almost three times as much.
In this particular case, DEGIRO Basic is the best option, closely followed by Interactive Brokers Tiered Account.
Advanced Investor
Let’s look at the last scenario for our European investor. This time our investor has 500,000 euros and invests 10,000 euros per month. This is not a typical scenario, as there is a lot of money at stake. But for motivated investors or people with high incomes, it’s still possible.
This scenario will give us such detailed results:
DEGIRO vs Interactive Brokers for an advanced European investor
Here are the prices for each trading account:
- DEGIRO Basic : EUR 51
- DEGIRO Guard : 362 EUROS
- Interactive Brokers Fixed : EUR 120
- Interactive Brokers Staggered : EUR 70
This time the winner is DEGIRO Basic. Compared to the previous scenario, it has increased very little. DEGIRO Childcare, on the other hand, has become too expensive.
In the latter case, the DEGIRO Basic is the better choice than the. Interactive Brokers, however, is far behind.
European investor’s view
For European investors, we can draw several conclusions:
- Interactive Brokers Tiered is a good option for retail investors.
- DEGIRO Basic is the cheapest account if you invest less than € 5,000 per month.
- The DEGIRO deposit starts to increase as your portfolio grows and generates more dividends. You can consider Interactive Brokers if you don’t want your broker to lend you shares.
- Investing without changing currency can save a lot of money.
Personally, I would choose Interactive Brokers because it is sometimes cheaper and also because it is a more professional broker. Interactive Brokers has a much better reputation and better communication.
Output
The best broker for Swiss investors
Interactive brokers
Interactive Brokers is an excellent stockbroker with extremely low commissions! Trade in US securities for as little as USD 0.5!
That’s it! We now know the cheapest option between DEGIRO and Interactive Brokers for different scenarios. It is interesting to note that both brokerage accounts are competitive.
Several conclusions can be drawn from this comparison:
- For the Swiss investor, Interactive Brokers Tiered should be the most favorable broker.
- For the European investor, DEGIRO Basic should be the most favourable brokerage option.
- There is a very small price difference between DEGIRO Basic and Interactive Brokers Tiered.
- The storage of DEGIRO deposit accounts quickly becomes expensive as the size of your portfolio increases.
So, what to choose? I recommend everyone to choose the Tiered Account from Interactive Brokers. For Swiss investors, IB is much better because it offers a much cheaper exchange rate. For European investors DEGIRO is slightly cheaper, but the difference is almost negligible. Therefore, it is preferable to use a more professional broker, such as Interactive Brokers.
If you want more information about these brokers, you can read my reviews:
If you don’t know where to start, you can read more about how to invest in the stock market.
What about you? Which broker do you use?
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Mr. Poor Switzerland is the author of thepoorswiss.com. In 2017, he realized he had fallen into the trap of lifestyle inflation. He decided to reduce his expenses and increase his income. This blog tells the story and the conclusions. In 2019, he will save more than 50% of his income. He has set himself the goal of becoming financially independent. Here you can send a message to Mr. Send Bad Swiss.
Frequently Asked Questions
Is Interactive Brokers good for Europeans?
Yes, Interactive Brokers is a good choice for Europeans.
Which broker is best in Europe?
The best broker in Europe is Interactive Brokers.
Why is Degiro so cheap?
Degiro is a discount broker, which means that it offers its services at a lower price than other brokers.
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