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How a Penny Stock Index Can Affect Your Investment Decisions


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In Search of a Penny Stock Index

Penny Stock IndexAnyone who tells you that there is only one penny stock index is either intentionally misleading you or is misinformed. In fact, penny stocks are listed on almost every major index in existence. By definition, a penny stock is simply any stock that sells for less than five dollars per share. If you want to find a penny stock, take a quick scan through the NASDAQ or the New York Stock Exchange. Most of the stocks you see will not be penny stocks, but a few of them will be. The problem with using these exchanges to trade low-cost stocks, however, is that they give you only a small part of the picture. The vast majority of penny stocks do not meet the requirements for listing on the regular markets. Every market has its own set of criteria, but most require listed stocks to have a certain amount of market capitalization, to have been in existence for a certain number of years and to be filed with the SEC. If you want to see all of the stocks that do not meet these requirements, you will have to look at a different penny stock index.

A Penny Stock Index for the Over-The-Counter Market

Stocks that do not meet regular market requirements can still be sold on the over-the-counter (OTC) market. Even the OTC market, however, offers more than one penny stock index. The Pink Sheets are one of the most popular indexing services available. They are virtually unregulated, asking companies to supply little information. Stocks need not meet requirements for age or market capitalization and they need not be filed with the SEC. The Over the Counter Bulletin Board (OTCBB) is the other major player in the penny stock listing game. The OTCBB functions similarly to the Pink Sheets and lists many of the same stocks. It requires, however, that all stock be filed with the SEC, giving investors a bit of added security in their investments. If you want to see all of your choices, the Pink Sheets may be the best choice. If you want the security that the SEC has to offer, however, the OTCBB may be the penny stock index for you.

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