Pink sheets? Over the counter? what!?
Question:
Are these too risky?
Penny stocks? (stuff under a buck)..ANY good or waste of time? Keep in mind, my "risk-tolerance" is VERY HIGH...I believe in "rollin those dice"...see what happens. (They all laughed at Bill Gates long ago too..)
Thanks in advance.
Answer:
There's sooooo much poor information here.
When you invest in most stocks the Stock Exchange manages things so you are guaranteed to find a buyer if you're selling and guaranteed to find a seller if you're buying. The large banks are granted favourable trading terms in return for being in the market and quoting a price to take those 200 MSFT shares off your hands. They can drop the price they're prepared to pay when more people are selling than buying but they commit to being in the market and quoting a price most of the time.
Pink Sheets and Over The Counter are basically the same thing (the name Pink Sheets comes from the fact that closing prices were printed and distributed at the end of the trading day on pink paper). It is a seperate market for stocks not quoted on the main market. Basically, when you want to buy or sell a stock there is no guarantee there will be anyone prepared to trade with you. The more popular stocks normally trade reasonably well but there are thousands of stocks on the OTC market that trade no volume for weeks at a time. Most of the shareholders will be held privately and if no one is prepared to sell you're not going to be able to buy. If you are able to find a seller you run the risk of paying a large spread (the difference between the buy and sell price). On the main market the buy or sell price for MSFT will be the same. On the OTC market the buy price for a stock might be $10 higher than the sell price.
The biggest danger is that something happens to the stock while you're holding it and you find yourself locked in. If I buy MSFT I can sell the stock seconds after bad news is announced by going to my PC and logging onto my brokerage account. If I hold OTC stock I can only sell my stock if there's someone out there prepared to buy.
OTC stocks are not neceessarily up and coming, as with penny stocks choose very carefully. Stocks quote on the OTC market for a number of reasons, and there are definately some bargains out there. But it is much much more risky than the main market.
'Pink Sheets' and OTC are basically both 'penny stocks', stocks worth less than about 5 dollars. Most don't get listed until they're over 10 bucks/share, at least...
I suggest you to avoid Pink Sheets like The Plague and I strongly suggest you to see "The Sopranos" on HBO on Demand or buy the entire five seasons on DVD and you will understand in more detail why you must stay away from Pink Sheets.
OTC on the other hand is a market where you can invest safely but I would not recommend it if you are an Extremely Small Investor (And you must be if you are using sharebuilder)
If your Risk Tolerance is very high you can always invest in very high risk stocks in the New York Stock Exchange, NASDAQ or AMEX just like the rest of us.
Microsoft went public on March 13, 1986 at $21.00
Most Companies trade on any of those 3 Stock Markets.
Google, Yahoo, Amazon, Ebay and thousands more.
Can you name a OTC Company that actually move up from the OTC to the NYSE, NASDAQ or AMEX?
I suggest you to research how many companies in the last decade have graduated to the big markets.
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Wait until you have saved up at least $2000 and get a tdameritrade account. If it isn't on sharebuilder, you probably don't want it anyway. They offer access to 5000 companies, what more could you want.
And I would agree with the above about the pinks. Run fast and far from the pinks. They have a bad reputation because they have earned it.
$30 on OTC and pink sheet listed stocks won't get you anywhere. You are better off investing how you are. You need a regular online broker to trade OTC and pink sheets.
But since you are investing small, invest in CANROYS (Canadian Royalty Trusts). Nice dividends. And if your sharebuilder account is a non-ira account you can recoup what you pay in foreign taxes.
Frank: TVIN. Were AMEX, then otc, then pink, back to otc, now NASDAQ small cap. I have a long history with them. :o)
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