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

The Smart Money is defined as cash invested or wagered by those considered to be experienced, well-informed, “in-the-know” or all three. The Smart Money is different from institutional investors. The Smart Money can be individual or entire institution, such as Warren Buffet, Godman Sachs who have capacity to move the market dramatically. If you follow their trading patter, you can make profit from the stock market or ETF trading.

We have often heard discussions about the Smart Money and the Dumb Money. We wish more investors were in the Smart Money category. But 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 they are actually 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 has a specialized capability to deal with a crisis. For example, the Smart Money successfully detected the warning signals before the infamous financial crisis of 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 sometimes seems very abstract. However, the Smart Money can be one individual or an entire institution. Examples would include Warren Buffet, Jon Hilsenrath, Goldman Sachs, etc. These people or institutions have the capacity to move the market dramatically.

Jon Hilsenrath is a Federal Reserve reporter for The Wall Street Journal. It would be in an investor’s best interest to become acquainted with Hilsenrath’s work. 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 then the bleeding finally stopped. This was equivalent to a 29% drop.

If you follow the Smart Money, you can profit from their trading patterns. Even if you do not make a profit, at the very least you can avoid loss from the stock market.