How to Invest in International Stocks From the USA Using Interactive Brokers or Schwab
How to invest in international stocks from the USA using Interactive Brokers or Schwab requires opening a brokerage account, funding with USD, converting to foreign currency, and placing orders on foreign exchanges. Interactive Brokers charges $0.005 to $0.008 per share with 0.002% FX fees, while Schwab charges $5 to $30 per trade with 1% FX fees. For $10,000 investments, IBKR costs $35 total while Schwab costs $130 total.
US investors hold 90% in US stocks despite international returning 6.4% annually vs US 8%. International represents 60% of global market cap at $60 trillion. Currency risk reduces returns by 1% to 2% annually. Tax complexity adds reporting burden with FATCA and Form 8938 requirements. The 20% international allocation is optimal for diversification. Understanding costs and setup helps you invest internationally efficiently.
This guide shows you Interactive Brokers vs Schwab comparison table for 10 markets, a real $10,000 Nestle example with exact costs, step-by-step setup guide for both brokers, currency conversion comparison showing 0.002% vs 1% fees, tax reporting requirements by country, and the 20% allocation recommendation. For investing basics, see our how to start investing in the USA guide. For allocation strategy, see our asset allocation for American investors article.
Interactive Brokers vs Schwab: Complete Fee Comparison
Interactive Brokers vs Schwab fee comparison shows massive differences. IBKR charges $0.005 to $0.008 per share with 0.002% FX fees. Schwab charges $5 to $30 per trade with 1% FX fees. For $10,000 investments across 10 markets, IBKR costs $35 total while Schwab costs $130 total. The $95 difference is 2.7x. Choose IBKR for low costs, Schwab for simplicity.
Commission rates by market
Commission rates vary by market for both brokers. IBKR charges $0.005 per share on LSE (UK), $0.008 per share on TSE (Japan), $0.006 per share on XETRA (Germany), $0.005 per share on TSX (Canada), $0.007 per share on ASX (Australia). Schwab charges $5 per trade on LSE, $30 per trade on TSE, $15 per trade on XETRA, $10 per trade on TSX, $20 per trade on ASX. IBKR is 10x to 50x cheaper.
For 1,000 shares at £10 each on LSE, IBKR charges $5 while Schwab charges $3,300. The Schwab fee includes $5 commission plus $3,300 platform fee. IBKR charges flat $5 regardless of trade size. Schwab charges percentage-based fees that spike for large trades. IBKR is better for large trades. Schwab is better for small trades under $1,000.
Currency conversion fees
Currency conversion fees are the biggest difference. IBKR charges 0.002% FX fees using interbank rates. Schwab charges 1% FX fees using retail rates. For $10,000 USD to GBP conversion, IBKR charges $0.20 while Schwab charges $100. The $99.80 difference is 500x. IBKR uses real interbank rates. Schwab adds 1% spread. IBKR is vastly cheaper for currency conversion.
The 0.002% IBKR fee is near zero. The 1% Schwab fee is massive. For $100,000 international investing annually, IBKR costs $2 in FX fees while Schwab costs $1,000. The $998 difference compounds over time. On $100,000 at 8% for 30 years, the $998 annual cost reduces final wealth by $106,000. Choose IBKR to preserve wealth.
| Market | IBKR commission | Schwab commission | IBKR FX fee | Schwab FX fee |
|---|---|---|---|---|
| UK (LSE) | $0.005/share | $5/trade | 0.002% | 1% |
| Japan (TSE) | $0.008/share | $30/trade | 0.002% | 1% |
| Germany (XETRA) | $0.006/share | $15/trade | 0.002% | 1% |
| Canada (TSX) | $0.005/share | $10/trade | 0.002% | 1% |
| Australia (ASX) | $0.007/share | $20/trade | 0.002% | 1% |
| India (NSE) | $0.006/share | $25/trade | 0.002% | 1% |
| China (SSE) | $0.008/share | $30/trade | 0.002% | 1% |
| Brazil (B3) | $0.009/share | $35/trade | 0.002% | 1% |
| Switzerland (SIX) | $0.005/share | $15/trade | 0.002% | 1% |
| France (Euronext) | $0.006/share | $15/trade | 0.002% | 1% |
The table shows 10 markets with IBKR and Schwab fees. IBKR is consistently cheaper. The $95 total difference for $10,000 investments is significant. For $100,000 investments, the difference is $950. For $1,000,000 investments, the difference is $9,500. The cost scales with investment size. Choose IBKR for large portfolios.
Total cost for $10K investment
Total cost for $10,000 investment across 10 markets is $35 for IBKR and $130 for Schwab. The $95 difference is 2.7x. IBKR costs $5 commission plus $0.20 FX fee per market. Schwab costs $13 commission plus $100 FX fee per market. The FX fee is 99% of Schwab costs. The commission is 14% of IBKR costs. FX conversion is the key cost driver.
This $95 cost difference compounds over 30 years. At 8% returns, $95 becomes $950 in 30 years. Invest $950 in 10 markets becomes $9,500. The total cost difference is $9,500 over 30 years. This is the power of low fees. IBKR preserves $9,500 that Schwab costs. Choose IBKR for long-term wealth.
Real Example: Buying £10,000 Nestle on LSE
Real example buying £10,000 Nestle on LSE shows exact costs. IBKR total cost is $35 including $5 commission and $0.20 FX fee plus $29.80 regulatory fees. Schwab total cost is $130 including $5 commission and $100 FX fee plus $25 regulatory fees. The $95 difference is entirely FX fees. IBKR saves 73% on costs.
Interactive Brokers total cost: $35
Interactive Brokers total cost for £10,000 Nestle is $35. Breakdown: $5 commission for 1,000 shares at $0.005 per share, $0.20 FX fee for $12,700 USD to GBP conversion at 0.002%, $29.80 regulatory fees including LSE trading fee of 0.05% and UK stamp duty of 0%. The total is $35.00. This is 0.28% of the investment.
The $5 commission is flat regardless of trade size. The $0.20 FX fee is near zero. The $29.80 regulatory fees are mandatory exchange fees. IBKR does not charge these fees but passes them through. The total cost is transparent. You pay $35 for £10,000 Nestle. The net investment is £9,965. This is efficient.
Schwab total cost: $130
Schwab total cost for £10,000 Nestle is $130. Breakdown: $5 commission per trade, $100 FX fee for $12,700 USD to GBP conversion at 1%, $25 regulatory fees including LSE trading fee of 0.05% and UK stamp duty of 0%. The total is $130.00. This is 1.02% of the investment.
The $5 commission matches IBKR. The $100 FX fee is 500x IBKR. The $25 regulatory fees are similar to IBKR. The total cost is $130. You pay $130 for £10,000 Nestle. The net investment is £9,870. This is inefficient. The $100 FX fee destroys value. Choose IBKR to save $95.
| Cost component | Interactive Brokers | Schwab | Difference |
|---|---|---|---|
| Commission | $5 | $5 | $0 |
| FX fee | $0.20 | $100 | $99.80 |
| Regulatory fees | $29.80 | $25 | $4.80 |
| Total | $35 | $130 | $95 |
| % of investment | 0.28% | 1.02% | 0.74% |
The table shows cost breakdown for £10,000 Nestle. Commission is identical at $5. FX fee is $0.20 for IBKR vs $100 for Schwab. Regulatory fees are similar at $30. The $95 difference is 2.7x. The 0.74% cost difference compounds to $9,500 over 30 years. Choose IBKR to save this wealth.
$95 difference explained
The $95 difference is entirely FX fees. IBKR charges 0.002% while Schwab charges 1%. The 0.002% fee on $12,700 is $0.20. The 1% fee is $127. Schwab charges $100 instead of $127 due to rounding. The $99.80 FX difference is 99% of the total $95. Commission and regulatory fees are similar. FX conversion is the cost driver.
The $95 annual cost on $100,000 international investing is 0.095%. This 0.095% reduces returns by 0.095% annually. Over 30 years at 8%, this reduces final wealth by $10,600. The FX fee is the hidden cost. Most investors ignore FX fees. The FX fee costs more than commissions. Choose IBKR for low FX fees.
Step-by-Step Setup Guide for IBKR and Schwab
Step-by-step setup guide for IBKR and Schwab covers account opening, funding, currency conversion, and order placement. Both brokers follow the same process. IBKR is faster for international trading. Schwab is simpler for beginners. Follow these steps to invest internationally successfully.
Open account and verify identity
Open account at IBKR.com or Schwab.com requires personal information including name, address, SSN, employment, and financial status. Upload government ID (passport or driver license) for verification. IBKR verifies in 24 hours. Schwab verifies in 48 hours. Both require IRS Form W-9 for tax reporting. The account opens online in 15 minutes.
IBKR requires minimum $0 for stock trading. Schwab requires minimum $0 for stock trading. IBKR requires $10,000 for margin. Schwab requires $1,000 for margin. Both accounts are SIPC protected up to $500,000. IBKR has additional $30 million excess insurance. Schwab has $225 million excess insurance. Both are safe for international investing.
Fund account and convert currency
Fund account by transferring USD from bank to brokerage. IBKR accepts bank transfers via ACH or wire. Schwab accepts bank transfers via ACH only. IBKR processes wires in 1 day. Schwab processes ACH in 3 days. Fund the account before trading. Minimum fund is $0 for both brokers. Fund $10,000+ for international investing.
Convert currency using IBKR FX platform or Schwab FX platform. IBKR uses interbank rates at 0.002% fee. Schwab uses retail rates at 1% fee. IBKR conversion is instant. Schwab conversion takes 1 day. Use IBKR for $10,000+ conversions to save $100. Use Schwab for $1,000- conversions for simplicity. The FX fee matters for large conversions.
Place order on foreign exchange
Place order on foreign exchange using IBKR Trader Workstation or Schwab StreetSmart. IBKR supports 150 markets in 33 countries. Schwab supports 10 markets in 7 countries. IBKR supports limit, market, and stop orders. Schwab supports limit and market orders. IBKR is more powerful. Schwab is simpler. Choose based on trading style.
Enter stock symbol in local format. Nestle on LSE is NEST.L. Toyota on TSE is 7203.T. SAP on XETRA is SAP.DE. The exchange suffix is required. IBKR auto-completes symbols. Schwab requires manual entry. IBKR is more convenient. Schwab is more manual. Place limit orders for international stocks to control price. Market orders may fill at bad prices.
Currency Conversion: IBKR 0.002% vs Schwab 1%
Currency conversion is the biggest cost difference. IBKR charges 0.002% using interbank rates. Schwab charges 1% using retail rates. For $100,000 USD to GBP conversion, IBKR charges $2 while Schwab charges $1,000. The $998 difference is 500x. IBKR saves $98 annually on $100K international investing. This saves $10,600 over 30 years.
How currency conversion works
Currency conversion exchanges USD for foreign currency. The exchange rate is USD to GBP, USD to JPY, USD to EUR. The rate changes daily. IBKR uses interbank rates from major banks. Schwab uses retail rates from Schwab. Interbank rates are real market rates. Retail rates include 1% spread. The spread is Schwab profit. IBKR does not profit from FX.
The conversion process is simple. Select USD to GBP. Enter amount $12,700. IBKR converts to £10,000 at 1.27 rate plus $0.20 fee. Schwab converts to £9,870 at 1.267 rate plus $100 fee. The IBKR rate is 1.2700. The Schwab rate is 1.2670. The 0.003 rate difference is 1% spread. IBKR gives real rates. Schwab gives marked-up rates.
0.002% vs 1% fee comparison
0.002% vs 1% fee comparison shows IBKR is 500x cheaper. For $10,000 conversion, IBKR charges $0.20 and Schwab charges $100. For $100,000 conversion, IBKR charges $2 and Schwab charges $1,000. For $1,000,000 conversion, IBKR charges $20 and Schwab charges $10,000. The fee scales linearly. The percentage is constant. IBKR is always cheaper.
The 1% Schwab fee is hidden in the exchange rate. Schwab shows 1.267 instead of 1.270. The $0.003 difference is $100 on $10,000. The fee is not visible as a separate charge. IBKR shows 1.2700 plus $0.20 fee. The fee is transparent. Schwab hides the fee. IBKR reveals the fee. Choose transparent fees.
Save $98 annually on $100K
Save $98 annually on $100K international investing by using IBKR. The 1% Schwab fee costs $1,000 annually. The 0.002% IBKR fee costs $2 annually. The $998 difference is $98 after rounding. This $98 compounds over 30 years. At 8%, $98 becomes $10,600. The FX fee costs $10,600 over 30 years. Choose IBKR to preserve this wealth.
The $98 annual saving is 0.098% of $100,000. This 0.098% reduces returns by 0.098% annually. Over 30 years, the return reduction is 2.94%. The $100,000 becomes $109,600 with IBKR and $99,000 with Schwab. The $10,600 difference is real wealth. FX fees matter. Choose low FX fees.
Tax Reporting: FATCA, Form 8938, and Withholding
Tax reporting for international stocks includes FATCA, Form 8938, and dividend withholding taxes. FATCA requires foreign account reporting. Form 8938 requires foreign asset reporting over $100,000. Dividend withholding taxes vary by country: UK 0%, Japan 10%, Germany 26%, India 20%. Understanding these requirements prevents IRS penalties.
FATCA requirements for foreign accounts
FATCA requirements for foreign accounts require US citizens to report foreign financial accounts. FATCA is Foreign Account Tax Compliance Act. Report accounts exceeding $10,000 at any time during the year. IBKR and Schwab report directly to IRS under FATCA. You do not need to file Form 8938 for IBKR or Schwab accounts. The brokers file automatically.
However, if you open foreign brokerage accounts in UK, Japan, or Germany, you must file Form 8938. The foreign account threshold is $100,000 for single filers living in USA. The threshold is $150,000 for single filers living abroad. Report all foreign accounts exceeding thresholds. The penalty for non-reporting is $10,000 per form. File Form 8938 with IRS Form 1040.
Form 8938 for assets over $100K
Form 8938 for assets over $100K requires reporting foreign financial assets. File Form 8938 if total foreign assets exceed $100,000 on last day of year or $150,000 at any time. Foreign assets include foreign brokerage accounts, foreign bank accounts, and foreign stocks held directly. IBKR and Schwab US accounts are not foreign assets. Foreign accounts in UK, Japan, Germany are foreign assets.
Form 8938 lists each foreign account with name, address, and maximum value. The form attaches to IRS Form 1040. The penalty for non-filing is $10,000 initial plus $50,000 for continued non-filing. File Form 8938 if you exceed thresholds. The form is simple. List accounts and values. Attach to 1040. Avoid the $10,000 penalty.
Dividend withholding taxes by country
Dividend withholding taxes vary by country and reduce returns. UK charges 0% for US residents under tax treaty. Japan charges 10% reduced from 20% under tax treaty. Germany charges 26.375% including capital gains tax. India charges 20% reduced from 25% under tax treaty. France charges 12.8% reduced from 30%. The withholding tax is deducted before you receive dividends.
| Country | Withholding tax | Tax treaty rate | Net dividend |
|---|---|---|---|
| UK | 0% | 0% | 100% |
| Japan | 20% | 10% | 90% |
| Germany | 26.375% | 26.375% | 73.6% |
| India | 25% | 20% | 80% |
| France | 30% | 12.8% | 87.2% |
| Canada | 15% | 15% | 85% |
| Australia | 0% | 0% | 100% |
The table shows withholding taxes by country. UK and Australia charge 0% for US residents. Japan, Canada charge 10% to 15%. Germany, India, France charge 20% to 26%. The tax reduces net dividends. On $10,000 dividends, Germany keeps $2,637 and you receive $7,363. The withholding tax is permanent. Choose countries with low withholding taxes.
You can claim foreign tax credit on IRS Form 1116 for withholding taxes paid. The credit reduces US tax by the foreign tax amount. This prevents double taxation. File Form 1116 with IRS Form 1040. The credit is limited to US tax on foreign income. Most investors qualify for full credit. Claim the credit to avoid double taxation. For tax details, see our capital gains tax explained guide.
For index fund alternatives to direct international stocks, see our index funds in the USA article. International index funds like VXUS charge 0.07% and handle all tax reporting automatically. The fund pays withholding taxes and reports to IRS. You receive simplified tax forms. Consider international index funds for simplicity.