Even if you are new to the world of investing, you’ve likely heard the phrase penny stock at one point or another. For some, penny stocks has a negative connotation, but the reality is that millions of shares of penny stocks are traded each and every day in the United States and around the world and a significant amount of money can be made on them if you have the right information. Before we look at what some of the hottest penny stocks available on the market today are, let’s first define exactly what a penny stock is.

Depending on the definition you go buy, penny stocks can mean any stock that trades below a certain share price or any stock that is traded on a minor market instead of one of the well known, major markets like the New York Stock Exchange or the NASDAQ. For the sake of this article, we’ll define penny stocks as any stock trading under a certain price. Some people define a penny stock as any stock with a share price under $10, while others go with a share price under $5. No matter which definition you use, a penny stock is an affordable investment that just about anyone can make and, hopefully, turn a tidy profit on, but you have to know what you are doing before you go ahead and make that investment.

The first key to making a profit in penny stocks is getting to know which penny stock companies are worth investing in. This takes a bit of research to figure out since most financial newspapers spend their time talking about established blue chip companies and other financial news. Luckily, the Internet has allowed for a significant amount of reporting on penny stocks to become available to the average investor. Tools like Google News and web pages dedicated to penny stock news have helped make this kind of investing much easier than it has been in the past.

Many people wonder if investing in penny stocks is dangerous or unwise. The reality is that all investing is risky, no matter what stocks you buy. Even long time blue chip stocks lose value or even go out of business, so as soon as you realize that investing carries risk, you realize that investing in penny stocks is essentially no different than any other kind of investing.

Smart investing in penny stock companies takes research, reliable advice and a bit of luck. You want to try to match a company with the current financial climate and try to foresee the demands that may or may not be present in the future. If the economy is about to take a down turn, you probably want to avoid investing in a new company that makes high end sports cars, and put that money in a company that makes affordable food products or possibly green technologies that have a good chance of being used in the decades to come. In essence, smart investing in penny stocks, as is the rule with all stocks, starts with common sense. Use your head and you have a good chance of turning a profit with penny stock companies.