How to Profit from the Stock Market by Following the Smart Money

We have often heard of talk about the Smart Money and the Dumb Money.  We wish more investors were in the Smart Money category. However, what is the Smart Money? 

According to Investopedia, the Smart Money is defined as cash invested or wagered by those considered to be experienced, well-informed, “in-the-know”, or all three.

          People often confuse the Smart Money, with big money (institutional investors), but actually they are quite different. Usually the Smart Money sorts things out, before everyone else becomes bewildered. The Smart Money possesses ample resources and tools, has considerable expertise, is experienced, and especially has the capability to deal with a crisis. For example, the Smart Money successful detected the warning signals before the infamous financial crisis 2007-08. The Smart Money is given an edge over other investors, and has already taken advantage of the discounted prices before everyone else takes action.

The Smart Money sometime seems very abstract. However, the Smart Money can be one individual person or an institution, such as Warren Buffet, Jon Hilsenrath, Goldman Sachs, etc. These people or institutions have the capacity to move the market dramatically.

Just in case, you are not familiar with Jon Hilsenrath, he is a Wall Street Journal Federal Reserve reporter.  You can read the article, “Meet the Man Responsible For Today’s Huge 230 Point Dow Surge” from the following link to see how he is capable of moving the stock market.

http://www.businessinsider.com/jon-hilsenrath-2012-6

When Warren Buffet calls for buying stocks, usually there will be considerable profit.  Just recently, on 3/5/2013 he sent out emails to shareholders to buy stocks. The S&P closed at 1,539 that day.  On 5/6/2013, he said the market would go a lot higher. Sure enough, the S&P closed at 1,617 on 5/6/2013, and it registered a record intraday high at 1,709 on 8/2/2013.

On 12/5/2012, Goldman Sachs said that gold had reached its peak and the real rate would rise. 

ETF GLD, which mirrors the gold bullion supply, made record highs in October 2012. On 12/5/2012, Goldman Sachs declared that gold had seen its highest level.  ETF GLD was closed at 163 that day. It went up a little bit before it drifted all the way down until 6/27/2013. The closing price was 115 and the bleeding finally stopped.  This was equivalent to a 29% drop.

If you follow the Smart Money, you can profit from their trading patterns.