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My father often used this phrase when writing about the effect of interest rates on the stock market. When interest rates rise (he would write), money is gradually drawn out of the stock market, as the rewards of bonds and other interest-paying instruments increase. And when interest rates fall, money leaves those instruments and flows back into the stock market. This, of course, is a very simplistic explanation; interest rates have numerous interrelated effects. Nevertheless, it's true. But I would amend the saying, to "Money Goes Where People Think It's Treated Best." And it works for individual stocks, too. Growth investors can do well by following the institutional money, because professionals are putting it where they think it will be treated best.
Walter Wriston, CEO of Citibank from 1967 to 1984, said "Capital will flow where it is wanted and stay where it is well treated."