The new «smart money»

In the market, at a simplified level, two types of investors are traditionally defined: professionals (fund managers, institutions, etc.) and individual or retail investors; “smart” and “dumb” money respectively.

However, there are signs that this definition could be becoming obsolete. Tariffs, geopolitics, a government shutdown, double-digit corrections and potential bubbles, among others, have been important tests for market players in recent years.

In the face of these stress events, it should be the “smart money” that capitalizes on these opportunities, investing with discipline, for the long term. However, in April of this year (in the context of “Liberation Day”), according to JP Morgan data, it was retail investors who posted all-time record buying flows (more than US$40 billion) into the market. In the midst of a correction of more than 20%, the “dumb money” gave a lesson in cool-headedness and financial discipline.

In parallel, professional managers were more worried than in 2008 and Covid, according to market surveys.

There are still retail investors who abuse leverage, do short-term trading and maintain other bad practices in managing their wealth. That said, the spread of financial education and the improved access to highly diversified, low-cost indexed instruments, to name just a few factors, have allowed us to have a new “smart money” today.

Original publication in La Segunda on 09/10/2025