July 16, 2008

Understanding Pink Sheets or Penny Stocks

By IdeaMan21

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The Pink Sheets is an electronic quotation system, operated by Pink OTC Markets, that displays quotes from broker-dealers for many over-the-counter (OTC-traded) securities. Market makers (and other brokers who buy and sell OTC securities) can use the Pink Sheets to publish their bid and ask quotation prices. The name “Pink Sheets” comes from the color of paper the quotes were printed on prior to the electronic system, then published by the National Quotation Bureau.

The Pink Sheets is not a stock exchange. To be quoted in the Pink Sheets, companies do not need to fulfill any requirements (e.g. filing financial statements with the SEC). With the exception of a few foreign issuers (mostly represented by American Depositary Receipts, or ADRs), the companies quoted in the Pink Sheets tend to be closely held, extremely small, or thinly traded. Most do not meet the minimum U.S. listing requirements for trading on a stock exchange such as the New York Stock Exchange. These listings are then called penny stocks.

Companies with no financial history can be included in the Pink sheets listings. Therefore it needs to be clear that the pink sheets are not a registered stock exchange. This enables companies to raise capital who in this case would be unable to through the regular stock exchange.

So it must be noted companies within this exchange pose a greater risk. This is due in large part by the fact that companies on this exchange do not have to disclose much if any in the way of financial data.

The reality with pink sheets as is with penny stocks is the low cost of investment. This lures a lot of people in. They think because of the low cost that they risk little, but the opposite can be true. Because there are less requirements and very little financial data if any, one has to note that no history can mean that a company could be in financial ruin trying to raise capital.

As it is well known, higher risk means greater reward and just as equally greater losses. The inability to research these companies makes for a shot in the dark. As is often quoted, “diversify” Ask yourself if you take this risk can you afford to loose that money? If so then the rest is simple.

Fortunately there are services and newsletters that only specialize in Pink Sheets due to their high potential for profitability. One of the best of these Newsletters is called “Doubling Stocks”. They have been around for quite a while now and have a winning record. Partly this is due to their inside knowledge of Pink Sheets and a computer program that they have created that looks at thousands of stocks and thousands of scenarios and uses past histories to come up with highly likely stock picks.

You can even try out there Newsletter for Free for 60 Days. You will see for yourself how valuable this can be. Imagine doubling your money a couple of times a month. You don’t even have to invest a whole lot since these stocks are going for Pennies. It is quite a tempting investment and even more so once you have hit a couple of winners.

Click Here For More Information – Its Worth Your Time

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