Buy Penny Stocks

If you are already trading penny stocks on the OTCBB (Over the Counter Bulletin Board) then you no doubt have heard of Pink Sheets – formally known as Pink Quote.

Pink Sheets is an electronic quotation system for a number of over the counter (OTC) securities. The name is derived from the color of the paper on which the quotes were originally printed.

While penny stocks are securities that carry a value of less than $5, Pink Sheet Penny Stocks is a term for small shares or micro stocks that trade for under $1 a share. The companies that typically list in the Pink Sheets are the ones that are unable to meet the requirements of larger exchanges such as the Nasdaq and NYSE. In most cases, some companies use the Pink Sheets as a stepping stone to becoming listed on the regular exchanges and the Pink Sheets serve as an opportunity to raise capital.

The Pink Sheets do not have any listing requirements, allowing any company, even a company with no financial history, to be listed, although companies issuing stock on the Pink Sheets are at least bound by both State and Federal security laws.

The low cost of entry is the biggest advantage of trading pink sheets. Investors who wish to get in on a new company at the onset can pick up stock for literally pennies. If a company does well and grows that initial investment can grow from pennies to much large dividends.

A lack of liquidity is another risk to investors of Pink Sheet listings. The volume is usually very low and it can be very difficult to find a buyer for the stock. The seller may have to settle for a price that is much lower than initially anticipated just to be able to unload his or her shares.

Moreover, because there is no requirement for financial data, a company may simply vanish, leaving worthless stock issues in its wake.

Therefore, due to the nature of the Pink Sheets, being an unregulated exchange, there is generally more of a risk to investors than regular stocks that are on the larger exchanges.

Because of this risk, Pink Sheets Penny Stocks should only represent a small percentage of your investment portfolio. As in any kind of investment, play the game only if you are in a position to lose your entire investment.