Multiple choice

An investor wishes to switch between a money market mutual fund and an equity fund. What would you advise him?

  1. It would be better to stick to one type of fund, the one that meets his investment objective.

  2. He should keep switching parts of his investment from the equity fund to the money market fund as the market rises and switch back to the equity fund when the market falls

  3. He should switch from the money market fund to the equity fund in a rising market and switch back to money market fund when the Market falls

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Strategic switching between money market and equity funds based on market direction allows investors to capture upside while protecting capital during downturns. In rising markets, equity funds offer growth potential. In falling markets, switching to money market funds preserves capital by avoiding further declines. Option A is too passive. Option B describes market timing in reverse logic.

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