Robinhood vs. Interactive Brokers: Which Is Right for You? | The Motley Fool (2024)

There are clear differences in commissions and fees in Robinhood vs. Interactive Brokers. Robinhood has long been one of the lowest-cost brokers we've encountered. Interactive Brokers beats most competitors when it comes to margin trading. However, it has a complex fee structure for other trades.

Robinhood became famous for its zero-commission trading model and has stuck with it. Robinhood doesn't charge users for trading stocks and ETFs. This is why it's one of the best ETF brokers. Robinhood also charges no commission fee on option and cryptocurrency trades. Put with that a $0 account maintenance fee, and Robinhood lets users save on fees no matter what they trade.

Interactive Brokers offers two pricing options, IBKR Pro and IBKR Lite. IBKR Pro is for professional-grade traders. It offers a wider range of features and charges a variable commission fee. IBKR Lite offers fewer features but uses a simpler fee schedule. Because IBKR is suitable for most U.S. investors, we will focus on it, rather than IBKR Pro. IBKR Lite users enjoy zero-commission online trading of stocks and ETFs, which is offered by most of the top brokers. Beyond that, the two differ greatly, as you'll see below. Interactive Brokers' IBKR Lite offers a low-cost option to investors. However, it falls flat when compared to Robinhood.

When it comes to investments offered, Robinhood vs. Interactive Brokers reveals some divides. Robinhood lets investors trade stocks, ETFs, crypto, and options. Interactive Brokers offers those same investments plus mutual funds, bonds, futures, and currencies. Interactive Brokers beats Robinhood with its variety of investments to trade.

Like all brokers, Robinhood helps users buy and sell stocks and ETFs. Unlike most brokers, Robinhood also offers fractional shares. Fractional shares allow small investors to buy big names. Instead of buying a whole share of stock valued at, say, $3,000, an investor can buy a fraction worth $5. Options contract trading is available to investors with a high capacity for risk. Robinhood's platform also offers cryptocurrencies, a rare feature among the top brokers.

Interactive Brokers offers many investments beyond the traditional stocks and ETFs. Like Robinhood, Interactive Brokers offers fractional shares. Unlike Robinhood, Interactive Brokers offers over 45,000 mutual funds. This makes it one of the best brokers for mutual funds. Debt investors may find the availability of bonds at Interactive Brokers attractive. Interactive Brokers lets investors trade derivatives, including options contracts and futures. Additionally, Interactive Brokers supports the trade of crypto and fiat currencies.

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Another divide in the Robinhood vs. Interactive Brokers debate? The variety of accounts offered to investors. Robinhood's basic subscription supports taxable and retirement accounts. Interactive Brokers lets users choose between a variety of tax-advantaged investing accounts. Depending on the needs of an investor, the difference could be significant.

Robinhood's platform is designed to be simple. It offers taxable accounts, and recently, it added traditional and Roth IRAs to its lineup. Users can open a margin account, which offers few tax advantages. Robinhood covers all the basics; no custodial accounts, though.

Interactive Brokers offers a wide variety of investment accounts. Investors can save for retirement using a tax-advantaged traditional, Roth, or SEP IRA. Interactive Brokers offers custodial accounts, including UTMAs and UGMAs for intergenerational saving. Investors may enjoy access to one of the best robo-advisors. Interactive Brokers also offers margin accounts with extremely low rates. Interactive Brokers offers some of the most efficient account types for tax and transfer.

Robinhood vs. Interactive Brokers differ in their approaches to trading platforms. Robinhood's claim to fame is streamlined simplicity, and the ease with which new users can trade. Interactive Brokers prides itself on the depths of its features. The better one for you depends on your experience level and desire for bells and whistles.

Robinhood's mobile app has developed a wide following for one reason: simplicity. In the Robinhood app, users can do little more than see their portfolios and place trades. The app offers a no-frills experience with game-like features. For better or worse, this approach to investing has boosted Robinhood to the top of the list of best stock trading apps. Robinhood offers a desktop interface which performs similarly to the mobile app.

Interactive Brokers offers a variety of full-featured interfaces. The Client Portal is an intuitive desktop trading platform suitable for most investors. The IB Trader Workstation is for more active traders. It boasts a customizable suite of research tools and screeners well beyond what's offered by many other brokers. Interactive Brokers also supports a robust mobile app. On the app, users can access international market data, use tools, and place complex trades.

Robinhood vs. Interactive Brokers -- which is the best fit for you? It depends on the type of investments you trade, the fees you'll pay, the account types you use, and the interface you find most comfortable.

Robinhood is an industry leader in app accessibility and low-cost trading. It's a strong choice for investors who value simplicity. Both brokers offer stocks, ETFs, options, and cryptocurrencies. However, Robinhood's zero-commission model beats the fees charged by Interactive Brokers.

Interactive Brokers is a great option as a full-featured broker with an extensive trading platform. Interactive Brokers offers a wide variety of investment options and accounts suitable for a range of investors. Interactive Brokers offers over 45,000 funds, including 17,000 no-load, no-commission funds. As a result, mutual fund investors should have Interactive Brokers on their shortlists. However, Interactive Brokers users should be aware of its complex, blended pricing model.