Interactive Brokers or others for low-mid income American

[CapnRex]

Hello,

I’d like to ask for some easy to understand advice for starting to invest for retirement. My situation is:

• US Citizen living in Japan, married to a Japanese person
  Am now 33, and hope to start investing from January
  Don’t have a high-income job; neither does my wife - but we have low expenses
  My wife will max out her ideco by herself
  For now planning to stay in Japan for good, but might return to US someday
  I have never worked in the US, so I don’t have a 401k or IRA

I have read on these forums about being taxed by the US for using Japanese mutual funds. It appears that I need to take the general forum advice of “Our standard advice for US citizens is to use existing taxable accounts in the US to invest in low-cost index funds. Alternatively, open an Interactive Brokers account and do the same: http://www.retirejapan.info/blog/review ... ve-brokers “

So, since I don’t have an existing taxable account in the US, I looked up I.B. It appears that you need to prove you have done 100 trades to start using I.B., and that it is for frequent traders. Is that right? I’m just a normal guy with not much money to invest and not planning to change things too often.

Other options on these forums that I found:
Firstrade (https://www.firstrade.com/content/en-us/welcome)
TradeStation (https://www.tradestation.com/)
Monex

Any insight on I.B. or the others for someone in my situation?

Also, I am concerned about needing to exchange my yen to dollars to invest in I.B. and the others. That would mean I pay fees to invest, and then in the future, I pay fees to get my money out (unless I end up moving to the US before then). Any information on this?

I know this is a lot of information to ask for, but I would really be grateful for some sincere advice.

Thank you

[RetireJapan]

So, since I don’t have an existing taxable account in the US, I looked up I.B. It appears that you need to prove you have done 100 trades to start using I.B., and that it is for frequent traders. Is that right? I’m just a normal guy with not much money to invest and not planning to change things too often.

Not that I am aware of... did you see that on their site? When I opened my account a few years ago (didn't end up using it) I don't remember anything like that.

[N00bster]

I certainly did not have 100 trades when I opened my IB account. They will ask you a lot of questions when opening the account, but this is more to tailor the site to your experience level.

Although IB is designed for frequent traders, you can also use it as a buy-once-a-year-and-hold account. That's actually close to my usage.

Note also that if your balance is less than $100,000, you will have to pay $10/month as maintenance fee, unless you occur charges through transactions (in which case your transactions fee are deduced from the maintenance fee, up to $10). That's one of the things they do to encourage trading.

This aside, I find the site particularly well done. It also lets you do a lot of things that other brokers don't like complex transactions I have no use for. If you are a US citizen, I can definitely recommend them (if you cannot have access to a Vanguard account).

Regarding the exchange fee, you will have to pay it of course, but if you invest with a long horizon that should be negligible.

[mule96]

I also opened an IB account recently. It was quite a hazzle... The biggest drawback is the monthly fee as mentionend above.

They dont charge a fee for receiving money, and one withdrawal is free. Exchanging currency costs 2 USD if I got that right.

I didnt test it yet, but they say that for JPY you need to have an international transfer, which will be a problem for most major banks afaik. Other here use IB also, maybe they have more experience.

They allow to do much more than local brokers, but also for me I dont plan to trade frequently. Their fees on ETFs are insanely low compared to Japanese Brokers (I paid 1 USD the minimum, at SBI I would have paid 21.60 USD), so that could offset a lot of other costs.

[CapnRex]

Thanks for your replies.

You mentioned Vanguard - I'm not sure what that is. Should I be looking into it instead of IB? [btw within IB's ETF database there appear to be Vangaurd ETFs - is that what you meant? Or is it a different service like IB itself?

-

It looks like setting up an account with IB is possible.

For the moment assuming I go with IB, next is the investment plan. Through IB, it appears the American ETF groupings (according to https://www.interactivebrokers.com/en/index.php?f=1562) are:

Chicago Stock Exchange (CHX)
NASDAQ OMX BX (BEX)
NYSE American (AMEX)
NYSE Arca (ARCA)

Then, within these, there are SO MANY individual ETFs. For you Americans investing through IB, what are you investing in? How do you research which ETFs to choose? I guess this is an art in and of itself, but pointers would be so great. Are you just using sites like this https://money.usnews.com/funds/etfs ?

--

Lastly, for Americans who decided NOT to go with IB, what are you using?

Thanks!

[RetireJapan]

Read this series of blog posts (or his book): https://jlcollinsnh.com/stock-series/

That should give you the basics of investing

[N00bster]

You mentioned Vanguard - I'm not sure what that is. Should I be looking into it instead of IB? [btw within IB's ETF database there appear to be Vangaurd ETFs - is that what you meant? Or is it a different service like IB itself?

Vanguard is another broker, and the one that provides the lowest-cost ETFs (although you can also buy them from other brokers like IB). Since you have US citizenship, you should be able to open an account with them, although I am not sure whether you need to also be residing in the US for that or not. Other US forumers may be able to confirm.

[CapnRex]

Thanks again.

So I found https://www.vanguardjapan.co.jp/retail/home.htm . Would this count as an American entity or Japanese? If I joined "Vanguard Japan" would US tax it as a foreign fund?

If so, then I would need to apply through the US branch, right?

[mule96]

I don't think Vanguard Japan sells directly, you would have to apply at Vanguard in the US (if it is possible for US residents not residing in the US).

[CapnRex]

I don't think Vanguard Japan sells directly, you would have to apply at Vanguard in the US (if it is possible for US residents not residing in the US).

Thank you.

I will look into Vanguard from the US. I'm planning to start in January so I don't want to apply quite yet.

Does anyone have experience applying to Vanguard from Japan? How did it go?