To OTC or ETF? That is the Question

I’d like to buy a vowel

Why some investors choose the Over-the-Counter (OTC) markets

OTC market companies present substantial opportunities for investors and up-and-coming companies to establish themselves. How? Developing companies can receive the financial support they need to grow their companies without the heavy hand of the ‘Big Board’ market place and the 99% still get to participate (albeit to a smaller degree) in the public markets.

Why ETFs are the choice du jour for some investors

ETFs have gained popularity with some investors looking for preselected “bundles” of securities that are diversified across industry horizontals. Even though ETFs follow the asset’s value, they are still speculative in nature because the market ultimately determines the prices. ETFs are passively managed which can be a huge draw for some investors, but they may contribute to market instability.

OTC vs ETF

Unlike OTC securities, ETFs are traded on major stock exchanges, like the New York Stock Exchange and Nasdaq. Investors don’t own the underlying assets in an ETF fund, they only own a portion of it. This is not the case for owners of OTC securities—they own the bag. ETF bundles diversify risk whereas OTC securities are purchased individually, so investors own the entire upside and downside. Both OTC and ETFs are traded intradaily, similarly to the stock market. 

Every investor’s goals, risk tolerance and strategy are different, so it’s crucial to determine what makes sense for your particular situation before you invest a single penny in the market. 

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Wanna learn more?

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