Want to invest in Taiwan stocks and US stocks? First, understand the "three-tier game rules" of listed, OTC, and emerging stocks.

Essential Reading Before Investing: The True Differences Among Three Listing Methods

Many novice investors feel confused about the Taiwan stock market—why are some companies listed, some OTC, and others talking about emerging markets? In fact, these three listing methods represent completely different levels of investment difficulty and risk. Simply put, Listing is an elite club, OTC is for mid-sized companies, and emerging markets are the cradle of startups.

Listing: The Standard Stage for Large Companies

In Taiwan, listed companies are traded on the “Taiwan Stock Exchange” (TWSE); in the US stock market, being listed means being traded on the New York Stock Exchange (NYSE) or NASDAQ.

Listed companies must meet strict listing criteria. For example, in Taiwan, companies need to be registered under the Company Act for at least 3 years, have a paid-in capital of over NT$600 million, and pre-tax profits must meet certain ratios. US requirements are relatively flexible—for instance, companies listed on NASDAQ that are unprofitable only need to have a 2-year operating history and shareholder equity of at least US$5 million.

Core features of listed stocks:

• High trading volume, always available for buying and selling
• Relatively stable volatility, suitable for conservative investors
• Highest financial transparency, quarterly financial reports must be disclosed
• Typical companies include TSMC, Delta Electronics, MediaTek, etc.

OTC: A Stepping Stone for Growth Companies

OTC trading occurs at the “TPEx” (Taipei Exchange), which hosts many growth-stage and mid-sized companies. Unlike listing, OTC uses broker-dealer inventory trading, offering a wider variety of financial products—not just stocks, but also bonds, foreign exchange, cryptocurrencies, etc.

OTC conditions are relatively lenient: companies only need to register for 2 full fiscal years, have paid-in capital of NT$50 million, and pre-tax profits accounting for 4% of share capital. This means many companies still in growth stages can enter the OTC market.

Investment characteristics of OTC stocks:

• Moderate trading volume, but more obvious volatility
• Price fluctuation limits exist, but opportunities and risks coexist
• Suitable for experienced investors who can handle moderate risk
• Rich in themes, often biotech, emerging industries

Emerging Market: High-Risk Incubator

Emerging stocks (Emerging Stock Board) are companies that do not yet meet OTC requirements but seek financing and exposure. Common among startups, biotech-medical companies, or teams with promising themes.

Extreme features of emerging stocks:

• No price fluctuation limits, can surge or plunge over 50% in a single day
• Negotiated trading, not automatic matching, with extremely low liquidity
• Incomplete financial disclosures, highly speculative
• Must be traded in lots of 1,000 shares, no day trading or margin trading allowed

Emerging stocks are not recommended for beginners unless you are prepared to accept the risk of losing your entire principal.

The OTC Market Structure in US Stocks: Three Tiers

The US OTC market (OTC Market) is divided into three levels, with decreasing regulation and increasing risk:

1. Best Market (OTCQX) — Most regulated Companies must report financials to the SEC; low-priced stocks and shell companies are ineligible. Many foreign companies already listed abroad trade here.

2. Risk Market (OTCQB) — Moderately regulated Gathering early-stage and developing companies, requiring annual financial reports but no minimum financial standards.

3. Pink Market (PINK) — No regulation threshold Companies only need to submit a form to FINRA to be listed, with no financial disclosures required. Highest risk level—featured in movies like “The Wolf of Wall Street” where the protagonist trades pink market stocks.

Assess Your Situation Before Investing

Before choosing between listing or OTC, beginners should ask themselves these three questions:

1. Do I have sufficient funds?
Calculate the amount available for investment clearly. Never invest your entire net worth. OTC and emerging stocks are suitable for high-risk funds that only make up 10-20% of your portfolio.

2. Do I have time to research?
Listed stocks have abundant news and data, making research easier. OTC stocks require deeper fundamental analysis. Emerging stocks demand the ability to discern financial authenticity and theme hype.

3. Can I handle volatility?
Monthly volatility for listed stocks may be 5-10%. OTC stocks often see 20-30% monthly swings. Emerging stocks can fluctuate over 50% in a single day. Can you sleep well at night?

How to Buy and Sell These Three Types of Stocks

Listed stocks: The simplest option

• Taiwan stocks: Open a securities account with a broker
• US stocks: Open an overseas broker account or use authorized trading platforms; note that US stock trading hours are 9:30 PM to 4:00 AM Taiwan time (winter time)

OTC stocks: Requires some preparation

• Taiwan stocks: Entrust a broker, sign an account agreement
• US stocks: Most overseas brokers support OTC trading

Emerging stocks: The most complex process

• Confirm your broker supports emerging stock trading
• Open emerging stock trading via in-person or online setup
• Sign risk disclosure documents
• Only spot trading, minimum lot of 1,000 shares
• Negotiated trading, transaction speed varies

Comparing Investment Returns: Why Take the Risk?

Investing in listed stocks has advantages: according to data, the S&P 500 has an average annual return of about 10% over the past 30 years, far exceeding bonds at around 5%. Additionally, listed companies regularly pay dividends, providing passive income. Stock returns can also hedge against inflation.

However, the risks of listed stocks are not negligible—market volatility can cause losses of 10% or more in the short term. OTC stocks carry even higher risks but also more opportunities. For example, a $1 OTC stock that rises to $1.5 yields a 50% return.

Investment Pathways for Different Groups

• Stock market beginners, conservative investors → Start with listed stocks
• Some experience, seeking growth → Allocate 20-30% to OTC stocks
• High risk tolerance, short-term traders → Use emerging stocks as 5-10% speculative allocation

Remember one principle: First learn to profit steadily in the listed market, then consider OTC conditions and timing, and finally, the high-risk game of emerging stocks. There are no shortcuts—only steady progress.