“The stock market is only for the rich to get richer!”
With the left taking aim at the wealth on Wall Street, I understand why I’ve been hearing this complaint more and more often.
And I’ll admit, I used to be the guy that made the rich richer.
In my days of managing a hedge fund, I oversaw millions of dollars worth of wealth and watched pockets get deeper and deeper.
Take it from me, if you think the market is rigged against you, you’re right!
But there’s a cheat code — and it’s your way to make money right alongside the big wigs on the Street.
Let me explain…
Follow the “Smart Money”
There’s an age-old piece of advice in trading.
Follow. The. Smart. Money.
You’ve probably heard this advice before.
The term “smart money” refers to Wall Street banks… financial gurus… and hedge fund managers who manage millions of dollars in client money.
Savvy investors know to follow them because they’re generally in tune to what’s going on before the general public — giving them an edge in the markets.
They’re also quick to sniff out when confidence in the markets is too high and stocks are due for a pullback.
Remember, they’re in control of HUGE chunks of cash, so the pressure is on for these firms and individuals to make the best moves for their affluent clients.
In other words, the smart money doesn’t follow trends, they drive the trends.
While they’re busy fattening millionaires’ wallets, however, there are ways you too can piggyback their elaborate system.
Here’s How to Piggyback the Smart Money
When I worked as a hedge fund manager, it was much easier to catch wind of big moves. Tapping into the network of smart money traders was an everyday thing.
Now, I don’t have nearly the amount of tools at my disposal, but I can still make sure you claim your fair share.
First, let me introduce you to 13Fs.
13Fs are quarterly reports filed by any U.S. money managers with at least $100 million in assets under management. These reports detail all the stockholdings of each particular money manager.
That’s right. The big-wigs on Wall Street aren’t allowed to keep their holdings secret forever.
45 days after the end of each quarter is the deadline for them to release these holdings.
That means you have an up-to-date list of all the stock investments held by some of the most well-known and influential money managers on the planet!
Warren Buffett, Ray Dalio, Seth Klarman, Howard Marks, Bill Ackman… I could go on and on!
My favourite website to check out the portfolios of these “whales” is Whalewisdom.com.
You simply type in the same of your favourite money manager’s fund, and instantly you can browse their most recent holdings, as well as see any changes they’ve made in the recent quarter.
Now let’s dig a little deeper…
Because you never want to just follow the smart money blindly. After all, they’re not always correct and 45 days is a lot of time when it comes to financial markets.
There are other factors at play that can show you whether it’s worth piggybacking Wall Street’s popular money managers.
First and foremost: Pay attention to volume, volume, volume.
Because of the 45-day delay, we might not be able to tell right away where the money is going, but we do know that these massive investors don’t just buy a single share…
They’re buying GIANT blocks of shares — market-moving trades.
That’s why I like to pay attention to volume, or the number of shares traded in a security during a given period of time.
When any one stock has a sudden pop in volume — 120% or so — there’s a good chance the smart money is piling in.
And if you catch these volume spikes, you can get ahead of the rest of the market.
[Pro Tip: Using 13F filings to create a short list of stocks to watch is a great way to keep an eye out for volume spikes.]
The other thing you should pay attention to is the type of stocks being bought by these money managers.
While these managers may have a stake in companies like Apple or Alphabet, these aren’t the kind of companies that can make you quick gains.
Rather, if the smart money is buying into a large company, think — what trend are they picking up on? And… Is there another way to play this trend?
Doing so can lower your risk by not tying up a big chunk of your money in say a $1,000 stock like Alphabet, while also increasing your upside potential.
So there you have it. Browse 13F filings… pay attention to volume spikes… and follow the trends are my three keys to piggybacking the “smart money” on Wall Street.
Use them yourself in your own portfolio, and one day you might just outsmart the smart money at their own game!