Prior research finds that mutual fund investors have adequate ability to select funds which superior performance remains persistent. Following the work of Keswani and Stolin (2008), we use a fund netflow as a proxy for investors¡¦ preference to examine whether the smart money effect exists. Furthermore, this paper differs from prior research by combining the smart money phenomenon and fund firm¡¦s marketing activities (the advertising expenditure of mutual funds). This paper generates four empirical findings. (1) Mutual funds with positive netflow subsequently have positive Carhart four-factor alpha, that is, the ¡§smart money effect¡¨ exists in Taiwanese mutual fund market. (2) The smart money effect is caused by investors¡¦ buying decisions. (3) The smart money effect is only a short-lived phenomenon. (4) Our evidence shows that advertising of funds can explain the smart money effect in Taiwanese open-end mutual fund market.