Editor’s Note: On Wall Street, there’s a species known as “smart money.” These are the institutional investors, hedge funds, and finance pros who—at least in theory—know more than the average retail investor scrolling Reddit for stock tips. Smart money operates like a shadowy cabal, quietly buying up shares before retail traders even realize there’s a trend and dumping them just as the hype reaches a fever pitch.

The name of the game is simple: buy low, sell high—before the crowd catches on. If you’re ahead of the herd, you’re golden. If you’re trailing behind, well, enjoy holding the bag. By getting in early and cashing out while the party’s still raging, smart money consistently outmaneuvers retail investors. Let’s break it down.

Forward-Looking Analysis

What this implies is that to capture the most upside in a stock, it’s important to invest in it before most other investors start to buy it. This could mean being an early mover or it could mean identifying undervalued stocks.

Read This Story: Six “Dumb Money” Mistakes That Will Destroy Your Wealth

The stock market isn’t some mystical oracle—it’s just a bunch of people (and algorithms) trying to guess the future. Investors don’t pay for what a company is; they pay for what they think it’s going to be. That’s why stocks make their biggest jumps (or nosedives) when new information scrambles those carefully crafted expectations.

And what shapes these expectations? A confluence of factors. Some hit every company—like interest rates, inflation, and the general mood of the economy (is it thriving or having an existential crisis?).

Others are industry-specific, like supply chain hiccups, fickle consumer tastes, or whatever new rule regulators dream up. Then there are the company-level quirks—balance sheets, profit margins, and whether the CEO is a genius or just really good at PowerPoint.

The Stages of a Corporate Lifecycle

It also doesn’t hurt to know where a company stands in its life cycle—kind of like figuring out if it’s a scrappy startup, an awkward teenager, or a midlife-crisis-ridden giant buying back its own stock instead of innovating.

If a company is supposed to be in its growth phase but is moving at the speed of a snail on vacation, or if it’s supposedly slowing down but is sprinting ahead like it just found the fountain of youth, that disconnect could spell opportunity for savvy investors.

There are five stages: 1) launch, 2) growth, 3) shakeout, 4) maturity, and 5) decline.

Launch: Welcome to the start-up phase—the corporate equivalent of a newborn giraffe trying to stand up. The company has officially launched, but it’s still wobbly, unproven, and desperately trying to establish itself. Because risk is sky-high and success is anything but guaranteed, traditional financing sources (like banks) tend to back away slowly, avoiding eye contact.

Enter the risk-tolerant investors—venture capitalists, private equity firms, and the occasional rich eccentric—who see potential where others see impending doom. If they’re willing to roll the dice, they can negotiate a sweet deal, knowing that if the company takes off, they’ll look like visionaries. If it crashes and burns? Well, they’ll have some great cautionary tales for cocktail parties.

This is also the phase where dreams are big, budgets are small, and public investment is off the table—so unless you’re an insider, you’ll have to sit this one out. Still, it’s worth keeping an eye on these scrappy upstarts. Who knows? Today’s garage-based hustle could be tomorrow’s market darling.

Growth: The company has officially left the runway—no more tinkering in the garage, no more scribbling on napkins. Now, it’s all about going full throttle on revenue, scooping up customers like they’re the last donuts at a morning meeting, and pouring money into growth.

The game plan? Buy up competitors, market like there’s no tomorrow, scale up production, and hire enough people to need a seating chart. Of course, all this expansion means profits might take their sweet time showing up. In fact, cash flow could resemble a college kid’s bank account—decidedly in the red. But hey, that’s the price of ambition.

Whether investors find a growth stage company attractive will depend on how they evaluate the company’s future trajectory. This stage is typically when a company will seek to go public. And this is where retail investors will be able to get in on the action.

Keep in mind, just because a company launches an initial public offering (IPO), it doesn’t mean the stock will necessarily go to the moon. History is full of failed IPOs. That’s yet another reason why it’s important to analyze a company and not just blindly follow the herd. As Warren Buffett says: “Be fearful when others are greedy, and greedy when others are fearful.”

Shakeout: Sales growth continues but the rate of growth begins to slow. This could be because the company has already captured most of the market, or its success has attracted competition.

At this point the company may begin to pay out a dividend to shareholders. It may seek to prolong growth by attempting to expand into other lines of businesses. It’s important to pay attention to the company’s profits to see how well the company is controlling expenses when sales growth slows.

Maturity: In this phase, growth has essentially maxed out. Without a major reform in business, there’s minimal revenue growth—even zero or negative growth.

However, if the company has a strong revenue base and good cost control, it can still remain profitable for years. Some continue to generate steady cash flow and pay an attractive dividend to shareholders. Conservative, income-oriented investors can find these types of companies appealing.

Decline: The companies that manage to find ways to rejuvenate actually stave off this stage indefinitely. However, those that fail to do so will eventually enter a stage of declining sales as their products or services become obsolete or as the competition eats into sales. At this end stage, management may have to consider an exit strategy.

For investors, the challenge is to find companies that likely have a long growth runway ahead but also whose shares haven’t already been bid up to overvalued levels. It’s also important to recognize that company lifecycles don’t always linearly follow the order outlined above. Sometimes a company seemingly in the decline stage can turn its fortunes around.

Recall that nearly 40 years ago, Apple (NSDQ: AAPL) was on the brink of bankruptcy. Today it’s one of the largest publicly traded companies in the world, with a market cap (as of market close, February 25) of $3.7 trillion (that’s “trillion” with a “t”). This is where analysis comes into play.

In fact, through rigorous analysis, one of my colleagues consistently makes money for his followers.

His name? Jim Fink, chief investment strategist at Investing Daily. If you’re looking for advice from the smart money, Jim’s your guy.

For most income investors, collecting quarterly dividends is the norm. But what if there was a way you could get paid each and every week, 52 weeks a year?

And what if, instead of getting $845 in dividends once every three months, you could get a $1,456 “paycheck” each week from the very same size portfolio?

Well, Jim Fink has developed an investment system that does all that…consistently. Click here to learn more.