How to Invest in OTC Stocks

by Jason Gordon ; Updated July 27, 2017

Investing can be a complicated business. Stocks, bonds, securities, equities, liquidity, exchanges, are just some of the specialized financial words in common use. Most investors, especially beginners don't need to know much more than NYSE, AMEX, and NASDAQ to buy most stocks in publicly traded companies. A more savvy investor, however, may want to buy a smalled company that isn't listed on one of the large exchanges for one or more reasons. These stocks can be bought Over-The-Counter or OTC through dealer networks.

How to Invest in OTC Stocks

Step 1

Contact your broker or investment company and ask about their OTC services. Many larger brokerages and investment banks offer OTC options.

Step 2

Research and choose the company you want to invest in like any other stock. Use the OTCBB to gather more information.

Step 3

Choose the company or companies you want to invest in, buy the shares just like you would a normal company or as instructed by your broker or financial institution.

Step 4

Track your newly purchased OTC shares more carefully than other stocks as their performance can be volatile due to lower trading volume. Be sure to ask your broker or financial institution about any special fees or trading times for your OTC stock.

Warnings

  • As OTC stocks have not gone through the oversight of being listed on exchanges, there is less transparency and therefore more risk. When investing OTC, it is even more important that you do your research when investing.

About the Author

Jason Gordon is a professional writer and editor. In addition to online work, he has written for "Texas Highways," "AAA Southwest," "Glimpse," the "University of Washington Daily" and the "Dallas Morning News." Gordon's passions include animals, reading and finding the perfect pairings of pastry and espresso.