Smart Money Has Many Forms

  • Posted by
  • on December 23rd, 2012

Some say that there is no such thing as smart money anymore. In an era when news and rumors break on StockTwits and Twitter out 20 minutes faster than Bloomberg, the play field is more than leveled. Access to information is not as crucial. The ability to interpret it properly is what makes the difference today and for that all you need is a price quote and a social media account to follow a few smart people.

Smart money starts trends and it often buys in anticipation of big trends.

Smart money is not Big Money.

Big money sustains trends. Without it, smart money would not be called smart money. Big money moves slow, but it creates waves. It makes a notable dent. It moves in predictable patterns and leaves traces for the observant eye. Big money is about asset gathering, Smart Money is about Return on Capital and optimal allocation that takes into account the opportunity cost of time and money.

What is smart money, actually? Someone that has high return consistently? What about the different time frames of operations?

Some people make a fortune by patiently waiting 5-10 years for their market thesis to develop; for the rest of the market to see what they are seeing now and bid up  asset prices. Other people, jump in and out of stocks for quick 5-20% returns and compound returns. Both parties are making money and yet, each of them considers the other party inferior. The quick compounders are called riverboat gamblers and the patient gatherers are called slow thinkers with deep pockets and big hopes.

There’s no need for name calling. There are a thousand different ways to make money in the stock market. There are thousand ways to lose money too. No one approach is the ultimate right approach.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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