Before investors consider jumping into an Internet of Things, or IoT, stock, it’s important  to first understand exactly what IoT is, what’s the real potential, and who’s making some important moves in the space.

The IoT isn’t a get-rich-quick, ride the tech wave to the top, scheme. It’s another investing angle investors should consider, among a myriad of other approaches. Also, with the IoT mostly in its infancy, near-term market gyrations are commonplace and the key for investors is to keep the long-term picture in mind as industry players carve out their IoT presence.

All right, the soapbox speech is over. Let’s dive in.

Understand the opportunity

At its basic level, the IoT is the connection of formerly unconnected ‘things’ that now (or soon will) connect to the Internet, gather data, and communicate with other devices and things around it.

The IoT brings huge benefits for industrial companies. Source: GE.

For example, cars will soon communicate with each other about where they are, where they’re going and whether or not it’s safe for you to enter an intersection. No kidding. The US National Highway Traffic Safety Administration is looking into it right now. IoT also allows companies to analyze data from industrial equipment so that it breaks down less, spends more time running, and costs less to repair.

IoT has the potential to make our lives safer, save companies and the public sector billions of dollars, and provide tech companies hefty revenues at the same time.

Gartner estimates 26 billion connected IoT devices by 2020, generating $1.9 trillion in sales . IDC says the IoT will be worth an astounding $7.1 trillion by that time. And Cisco Systems ( NASDAQ: CSCO ) takes it a step further and expected IoT to be a $19 trillion opportunity by 2020.

Those are all impressive numbers. And even if investors take the most conservative estimate among them, there’s clearly a lot of potential from IoT technologies.

Know what you’re looking for

Just like any subsection of a sector, the IoT isn’t just one type of investment. There are sensor companies, chip companies, software and services companies, analytics companies, and even worldwide conglomerates that are doing great things with the IoT.

To help you figure out who’s doing what in the space, here’s a look at a handful of companies that are all making waves in IoT:

• General Electric ( NYSE: GE ). GE already uses 10 million sensors in the equipment it sells, allowing its customers to analyze and track industrial products like never before. On top of that, the company built its own IoT software (called Predix) for managing all of that data. The company currently earns $1 billion in IoT revenue and expects $4 billion to $5 billion by 2017 .

Jump in

Companies are still at the beginning stages of IoT right now, so there’s both a lot of upside for investors and some significant risks as well. Most importantly, companies are still trying to figure out how to properly secure the Internet of Things. But despite the unknowns, it’s clear companies are moving forward in the space and investors can benefit. Once investors determine whether they want a pure IoT play (Sierra Wireless), or a stock that’s betting big on IoT but likely won’t tank if things don’t go its way (Cisco), then it’s time to jump in.

Just remember the same level-headed approach to investing applies to the IoT: find a great company that’s in a position to benefit more than the competition, and then stick with them for the long-haul.

$19 trillion industry could destroy the Internet

One bleeding-edge technology is about to put the World-Wide-Web to bed. It could make early investors wildly rich. Experts are calling it the single largest business opportunity in the history of capitalism. The Economist is calling it transformative. But you’ll probably just call it how I made my millions. Don’t be too late to the party— click here for 1 stock to own  when the web goes dark.