With an interest in buying penny stocks, you almost certainly would have heard the term “pink sheets” or just “pinks” at least once. The term “pink sheets” actually comes from the color of paper the stock quotes were originally printed on but now it refers to the electronic quotation system used for a variety of OTC securities.
Pink sheets penny stocks are essentially stocks with a price below $5.00 that trade on the Pink Sheets electronic quotation service. But what exactly is the pink sheets and how does it differ from the OTCBB and major markets like the NASDAQ and NYSE?
An important point to note about the pink sheets is that it is not a registered stock exchange but a computerized quotation system and the stocks that are listed on the pink sheets are generally stocks that could not meet the specific requirements of a major stock exchange. Furthermore, unlike stock exchanges the pink sheets are not regulated by the Securities and Exchange Commission (SEC). As such there are virtually no requirements for historical or even current financial data though companies issuing stock on the Pink Sheets are at least bound by both federal and state security laws.
Obviously due to the lack of regulation, the pink sheets can be a dangerous place to buy penny stocks. Therefore, you really need to perform your due diligence on any potential company your interested buying stock in. Companies can vanish with out a trace from the pink sheets along with your hard earned cash. Due to these factors in addition to the extreme volatility and unpredictability of pink sheets penny stocks, it’s highly recommended that an investor stick to trading with money he can afford to lose and no more than 10% of of his portfolio.
Having said all this, by exercising both caution and experience and by implementing specific stock strategies, a lot of money can be made in the pink sheets. Why? Simply, pink sheets stocks can double or triple in price very easily. A 5 cent share for example can quite easily become a 10 cent or 25 cent share in a matter of weeks, leaving a 100% or 400% gain respectfully. Seeing that the average stock goes up a measly 6% per year, it’s very easy to see the lure of penny stock investing.
Whether you decide to buy penny stocks on the pink sheets or on the OTCBB, by being very selective in the stocks you choose in addition to using various proven stock strategies to limit your risk, this portion of your overall portfolio can very easily become your most profitable one.
If you’re wanting to profit from penny stocks, you might want to look beyond the US borders (assuming that is where you live) and more specifically pay attention to Canada. A lot of investors who specialize in micro cap stocks love Canadian penny stocks and for good reason.
Canadian penny stocks and Canadian stocks in general have performed extremely well the past several years compared to the rest of the world. Canada, like the US is a very stable democratic country with low risk for political or economic instability. However, Canada is also extremely rich in natural resources including oil and precious metals which have all been skyrocketing in recent years along with the stocks related to these commodities. Canadian gold penny stocks and oil penny stocks in particular have done very well and made a lot of penny stock investors small penny stock fortunes!
With that said, how do you get your hands on Canadian penny stocks? In a nutshell, Canadian penny stocks can be found in five different markets: the pink sheets, OTCBB, the Toronto Stock Exchange, the TSX Venture Exchange, and to a lesser degree, the Montreal Exchange. The pink sheets and OTCBB are US markets and trade in USD. The other three are all Canadian stock markets and thus trade in Canadian currencies. The Toronto Stock Exchange is by far the largest and most reputable Canadian stock exchange with the strictest regulations. The Venture Exchange however is probably where you’ll find the most penny stocks and in particular, precious metal penny stocks.
Now that you know a bit about what markets Canadian penny stocks trade in, you really have two main options as far as how to actually buy them. The first option is to open a Canadian brokerage account whether it be a discount brokerage or full service brokerage. Some popular Canadian discount brokerage companies include Scotia itrade (formally E*trade Canada), Interactive Brokers, RBC Direct Investing, and CIBC Investor’s Edge. Full service brokerage firms include BMO Nesbitt Burns, RBC Dominion Securities, and Laurentian Bank Securities. The second option is to open a US brokerage account that allows trades in Canadian equities or to simply buy Canadian penny stocks via the pink sheets or OTCBB markets. The OTCBB especially often has the USD equivalent version of a Canadian penny stock that can be purchased in US funds.
No matter which option you choose, buying Canadian penny stocks is not difficult and the rewards can be great. Just make sure you always peform adequate penny stock analysis and research on each company just like you would before buying any stock investment.
