An investor is a perfect market timer and decides at the beginning of each month to invest in cash equivalents or equities,whichever is projected to do better.If the investor started with $1,000 on January 1,1927 and reinvested all proceeds,the investor would have earned approximately __________ at the end of 1978.

Question

Quizplus · Accepted Answer

A perfect market timer would have consistently invested in the asset class (cash equivalents or equities) that performed better each month. Over the long term, equities have significantly outperformed cash equivalents. Given the long investment period from 1927 to 1978, the compounding effect would result in a substantial amount, making $5.36 billion a plausible outcome.

An Investor Is a Perfect Market Timer and Decides at the Beginning