We propose a new smart or intelligent fluid which reacts upon a magnetic field. It is a magnetic compound fluid (MCF). We measured the relation of shear stress to shear rate with a rotating rheometer as its hydrodynamic characteristics and the complex magnetic permeability at heigh frequency range as its magnetic characteristics. The hydrodynamic characteristics can be varied qualitatively and quantitatively by the direction of the applying magnetic field, the type of a rotating body in the rheometer and the compound rate of the iron and the magnetite particles. The magnetic characteristics can be varied by the the compound rate of the iron and the magnetite particles. Also, the MCF is expectable for engineering applications with using a magnetic field.