What Are Pink Sheets Penny Stocks?

The first term that you must understand in order to understand pink sheets penny stocks is the term penny stocks itself. Simply put, a penny stock is any stock that sells for less than five dollars per share. Most belong to small companies or new companies. Many are associated with new or experimental products in industries such as the bio-chem industry or the medical industry. Most of these companies have little history and no track record on which to base investment decisions, which makes many careful investors nervous.

It is also important to understand what the pink sheets are. They are, in fact, a list of stocks printed on pink pieces of paper. The stocks listed, also referred to as over the counter, or OTC, stocks, have no minimum requirements and do not need to be listed with the SEC. While some companies give the pink sheets a comprehensive overview of their financial information, many provide little or no financial information, meaning that it can be difficult to gauge risk when choosing pink sheets penny stocks.

Investing in Pink Sheets Penny Stocks

Because there are so many unknowns when it comes to pink sheets penny stocks, many people simply avoid them. While they can be volatile, however, they can also be lucrative investments when done properly. It is important to research these stocks before you invest and it is important to make sure your information source is reliable. Many sites that list their top penny stock picks are biased and some even own shares in the stocks they recommend. It is also a good idea not to go overboard. Your penny stock investments should make up no more than 10-20% of your total portfolio. In spite of the risks, however, pink sheets penny stocks can be a very wise investment.

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