Have you ever heard of an OTC share? Do you know how to buy OTC stocks? If not, read below and open up another world of investing.
What are over-the-counter shares?
OTC stands for Over the Counter. OTC shares are not listed on an official stock exchange. There is an extensive network of dealers and brokers. To trade an OTC stock, you need to go through a broker to invest.
There are three types of OTC shares:
- Pink markets
OTCQX is best when it comes to learning how to buy OTC stocks. It is the hardest for businesses to enter and it has the strictest restrictions. According to OTC Markets, OTCQX companies “meet high financial standards, follow best practices in corporate governance, demonstrate compliance with US securities laws, (are) up to date in their disclosure, and have a presentation professional third-party sponsor â.
These companies must have a board of directors and an audit committee. In addition, they must hold annual meetings of shareholders. Penny stocks, shell companies and bankrupt companies are not allowed in this upper tier.
OTCQB is the middle level of the OTC market. This is called the business market. Companies at this level are generally new and do not have a long financial history. To be in this level of OTC markets, a business cannot be bankrupt. They must be up to date in their financial reports. They must also have a bid price of at least one cent and undergo management certification every year.
The pink market includes everything else. It is a transparent trading platform. It gives you access to a wide variety of businesses and investments. There are good companies in this level. But there are also bankrupt and delinquent companies at this level. The Pink Market is also home to bonds and other investments.
Examples of OTC shares
AcuityAds Holdings (OTCQX: ACUIF) is an advertising company that focuses on automation. It is also listed on the Nasdaq. The company meets high financial demands. It complies with US securities laws and is up to date in its disclosures. It had a third-party introduction by a professional.
A board of directors and an audit committee are in place. And they hold shareholder meetings every year.
Nova Minerals Ltd. (OTCQB: NVAAF) is an Australian company that exploits minerals. Right now it’s gold mining. It is listed on the stock exchange in 2009. It is not a new company.
Nova Minerals is not bankrupt. It is up to date in its financial reports and the share price is around $ 0.10 at the time of writing. It is therefore higher than the $ 0.01 listing price rule. When it was first listed, the price was $ 0.11, then dropped to $ 0.01. He climbed up and hit the eleven cent point again.
Example of a pink market:
AB Electrolux BS / ADR (ROSE: ELUXY) is called Electrolux and produces common household appliances. It is the second largest manufacturer of household appliances in the world, after Whirlpool.
It is a Swedish company. It trades over $ 46 and pays a dividend. The stock has also climbed since its first listing in 1987. It is an example of a business in the pink market that might be worth investing in.
If you’re looking for even better investment opportunities, take a look at these penny stocks I recently wrote about. There is also more information and opportunities below …
How to buy OTC stocks online
You now know a bit about the OTC market and how it works. If you like what you hear and want to invest in certain OTC stocks, it’s not as difficult as it might sound.
Go to otcmarkets.com first.
Then in the main menu under the Market Activity drop-down list, click on the stock filter at the bottom.
This will take you to a list of all the companies in the OTC markets. You can see the price, symbol, name, and other standard information about the stocks. You can also see if the stock is “penny stock exempt”. Which means one or more of the following three things:
- The purse is at least $ 5 per share,
- The company has returns of at least $ 6 million in the past three years,
- Or the business has assets greater than $ 2 million (if it has been in continuous operation for at least three years). Or $ 5 million (if in business for less than three years)
You can also see its dividend yield, SEC type, country of origin, and market.
You can browse OTC stocks with the filter, or you can use the filter to refine the stocks you see. You can choose the market (s) you want. You can also choose to filter security types, country, and industry. Same growth and performance of a business.
I often use the growth and performance tools of an equity reviewer. I also find good companies this way.
When using these two sections of a stock filter, you should know what you are looking for. Do a quick search for “what’s a good growth rate for a business” or something relevant to the filter you’re using. It can save tons of time and money.
After you find a company that you want to invest in in the OTC markets, you need to find a broker.
You are NOT MANDATORY to use a full service broker. But especially when you are just starting out, they can be worth the cost.
They can educate you and show you how things work. In addition, they will be there to support and guide you. Yes, they get bad press, but at first you don’t know what you’re doing. It’s a good idea to go see people who know what they’re doing.
Some of the best full service brokers are Fidelity Investments, TD Ameritrade, and Charles Schwab.
Find a broker, configure your online access and trade!
Are OTC stocks safe?
OTC stocks can be profitable, but it can be difficult. And you have to be careful. Some of them are extremely volatile. The fact that they are not listed on a major exchange means that it may be easier for crooks to get your money back.
However, this usually only applies to the pink market. Barriers to entry into the OTCQX and OTCQB markets make it more difficult to carry out a scam.
If you do your homework, you’re less likely to have someone take your money. Examine the history, leadership and finances of the company. Call the phone number listed on the website to see if it is legitimate. There are a lot of things you can do as an investor, and the more boxes you tick, the better your chances of success.
Hope you enjoyed this article on learning how to buy penny stocks over the counter. For the next step in becoming a better investor, I suggest signing up for Trade of the day below. It’s a free email newsletter packed with tips and tricks from trading experts. Whether you are a newbie or already experienced trader, there is useful information for everyone.
About Vanessa Adelman
Vanessa Adelman graduated with an interdisciplinary degree. She specialized in entrepreneurship, painting, music and cinema. Shortly thereafter, she received an editorial mentorship with Mark Morgan Ford. Then she got her AWAI verification. Now Vanessa is freelance in the direct financial response industry. She has been investing since 2016. In her spare time, she enjoys books on money and wealth. She enjoys being with her boyfriend, hunting, fishing and having outdoor adventures.