6 Reasons to Consider OTC Stocks

Investing is a vast world that takes a lot of time to navigate. However, with the right information and education, you’ll be able to make informed decisions and realize stock market success. One way to invest in the stock market is with OTC stocks. Learn more about what these stocks are, the benefits, and how they differ from traditional stocks.

What are OTC Stocks?

OTC stock, also called penny stocks, are stocks that are available to purchase from smaller companies who do not yet trade on traditional stock markets such as the New York Stock Exchange and NASDAQ. These stocks are usually less than $5 per share, making them an affordable way to get involved in the stock market, especially for someone who doesn’t want to risk much or doesn’t want to invest much in the beginning.

The Benefits of OTC Stocks

Stocks can help set you up financially with supplemental income, retirement money, or even with a down payment for a home purchase, and for many, OTC stocks are a great option. See these benefits to OTC stocks:

  • Low stock price: The low price of OTC stocks means you can diversify your OTC stocks across multiple options to see what works best for you. It also means that as long as you keep your total investment low, you won’t lose more than what your original investment was.
  • Potential to get a return on your investment quickly: A lot of OTC stocks move rather quickly, so you may realize your return on investment soon after investing in the first place.
  • Big gains: Because penny stocks move quickly, there is a chance you can lose often. However, you can also experience substantial gains. There have been cases when investors of OTC stocks start with $1,500 to invest and end up with a portfolio value of $1 million through the years.

How OTC Stocks Differ From Traditional Stocks

When you’ve determined it’s a good time to invest, you may think about whether OTC stocks or traditional stocks make the most sense for your financial situation. Here is how OTC stocks are different from those found on larger exchanges:

  • Method of sale: OTC stocks are sold entirely online through the OTC Bulletin Board, whereas traditional stocks are bought and sold on the stock exchange.
  • Regulations: While the traditional stock exchange is highly regulated, OTC stocks are less so, meaning that you can communicate more closely with the seller. However, fewer regulations mean you have a higher chance of encountering fraudulent stock listings.
  • Size of company: The traditional stock exchange includes companies that are larger than what you’d find selling penny stocks. They typically have a greater and longer financial history versus OTC stock companies who may be relatively new in comparison.

If you’re ready to make the jump to investing and making more money, consider OTC stocks so you can invest with mere dollars to get comfortable, control how much money you invest, and take on minimal risk.

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