Following The Trail Of Smart Money

Many of you who have been involved in investing for a time have probably heard of the term "smart money" and may have asked yourself what this means. Generally, the term is used loosely to describe not only experienced and knowledgeable investors but also the investments that are made by these experienced investors as well. It is also seems to find a great deal of usage among gamblers who have profitable angle or a bit of knowledge to aid them in choosing the right stakes in whatever game and can also refer to the bet itself.

At other times, you may read about the differences between smart money and dumb money. In essence, the difference is entirely one of knowledge and having the right information. It is also about experience; in the case of dumb money, it is lack of experience.

The problem is that the term "smart money" has a variety of meanings and one that is common has not so much to do with reputation for success than it does with having access to privileged information and using it to advantage in the stock market. In other words, investors who can make smart money investments typically have some kind of edge. This means that real "smarts" or knowledge is not necessarily a part of the equation and neither is talent or skill. This can refer to not only individual investors but also funds, groups, and businesses.

In the stock market world, the concept of smart money already has a black mark against it since it is often associated with illegal activities and outright cheating by the use of criminally obtained insider information that is not generally available to the public and the pool of investors trading at large. Most of this insider information has to do with knowing the performance of stocks and other securities ahead of their release to the public during market hours.

While agencies like the Securities Exchange Commission have enacted laws and guidelines to restrict the activities of smart money investors, there is only so much that can be done when nothing overtly illegal can be proven. Thus, smart money is left to influence and manipulate the flow of the market using various sources to obtain an advantage over mainstream investors.

About the author:

Sean Rasmussen is the webmaster and founder of Universal Wealth Creation.

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