Risks Associated with OTC Stocks
Because they are often attached to smaller companies, they aren’t as stable. So, they have more volatility and market risk. They also don’t have as much trading volume, so it may be difficult to sell them at the right time.
Trading penny stocks is like finding a “diamond in the rough.” You may find a company that can become a solid long-term investment, but they are few and far between. In fact, only a small percentage of them will become strong enough to sell on major exchanges. The reason is because they will not be able to meet their filing requirements.
They are riskier than standard investments, but you can get a much larger return if they move in your favor. Just bear in mind that it can go the other way, so make sure you analyze the risk of each stock before you decide to invest.
Penny stocks aren’t for the faint of heart, and they’re not for someone with a low risk tolerance. But taking on more risk can get you a larger return. You just have to be smart about it. Otherwise, you could lose more than you can afford.