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What the heck is "Smart Money" anyway?

What the heck is "Smart Money" anyway?

March 05, 2019

What the heck is “Smart Money” anyway? 

In my 26 years in the profession, I still don’t know what makes the media proclaim someone or some group “Smart”.  Is it their confident predictions (that are wrong more than half the time)?  The truth is that there is no standard definition. 

“Smart money” generally refers to a person/institution with a lot of money, but it can also be used to describe people who run complex investment schemes.   We might think of them as experts.

Historically, the “Smart Money/Expert” has not translated into outsized returns. Their returns are often in line with straightforward (not complex) investment strategies. In fact, the Barron’s Roundtable of Smart Money in 2018 handily underperformed the markets (and that was not an anomaly).

Jason Zweig recently opined, “The only smart money is the money that knows its own limitations.”

Warren Buffett said, “What counts for most people in investing is not how much they know, but rather how realistically they define what they don’t know.”

It is perfectly okay to recognize that you don’t know everything. And neither does the “smart money/expert”.  Once we define the limits of our knowledge and understanding, we can focus our time and energy on what matters most – those things we can control.

We can control:  our decisions and reactions to uncontrollable market events.  We can follow a disciplined and deliberate decision-making process crafted with our financial advisor. 

I’m here to help.  Let’s have a conversation about your decisions, reactions and process.  You can reach me at 612 436-3733 or jgilles@financialplanpartners.com

 

2019 The Behavioral Finance Network. Used with permission.