Although when most people think of the stock market, they are thinking of formal exchanges such as the NYSE, there are also a number of other smaller stocks which trade “over the counter,” known as penny stocks or OTC stocks. These can refer to any stocks that are traded electronically or via a dealer network, rather than through the centralized exchange. Most of the time, these stocks are listed as over the counter because the company is too small to meet listing requirements on the official exchanges. These are then traded by brokers who do business over the computer networks or over the phone.
If you are looking for OTC or over the counter stocks to buy and sell, you can look at bulletin boards that specialize in these types of items, such as the Over the Counter Bulletin Board or the pink sheets. Always be sure to research the companies you are investing in, however, because some of these stocks will be offered by companies with bad credit records or shady histories, which is why they can’t operate on a standardized stock exchange. Bonds are also a form of investment that is considered to be OTC securities, because they are not bought and sold on a formal exchange either.
There are a number of benefits to considering the purchase of OTC or over the counter stocks and bonds. To begin with, these can offer a huge profit for investors if you are willing to do your research. Because they are oftentimes far less expensive per share than other formalized stocks, you can purchase more at a time if you are just starting out. First time investors find that this is an easy and unintimidating way to build up a portfolio.
Yet if you have never invested before, always use a professional broker for advice before you purchase even the cheapest OTC or over the counter stocks. Some penny stocks can be bad investments. These are easy to buy on your own, but if you don’t have access to reliable research or the background of each company, you might not be sure if what you are buying is a sound investment or not. This is why you should navigate the world of OTC stocks with the help of a trained broker or financial advisor, just as you would for any other new stock purchase. This will ensure the best experience and reward.