Perfect market timer?
We all know that holding stocks for the long run is the recipe for wealth accumulation. According to MIT Professor Andrew Lo, $1 invested in the S&P 500 index on 1/1/1926 would have grown to about $4000 by the end of 2005. Not bad considering that $1 invested in the aggregate bond market over the same period would have only grown to $18.
However, for a “perfect market timer” who knows precisely when to sell and when to buy, this perfect timer would have grown the $1 to $23 billion. Now we know why market timing remains a popular sport among investors and speculators alike.
Source: April 2006 issue of Fund Alarm.
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