Samco Mutual Fund launches 'Timer STP' and overnight debt fund — NFO to open on Oct 4

Samco Mutual Fund (MF) has launched a systematic transfer plan (STP), called ‘Timer STP’, and a debt fund, named Overnight Fund, whose new fund offer (NFO) will run from October 4 to 6.

TimerSTP is a tool that determines the right time to invest more and the time to invest less in equity scheme with the help of Samco’s proprietary Equity Margin of Safety Index (EMOSI) indicator which is based on the margin of safety investing principle, the company said in a statement.

“Therefore, when markets are high, EMOSI signals to invest cautiously, and when markets are low, allows to invest aggressively ensuring maximum equity exposure to the investors. This enables investment in the markets without any emotional bias, removes the stress of tracking the markets constantly and endeavors to offer a higher reward/risk ratio,” it said.

The premise of TimerSTP lies in 2 common mistakes an average investor makes.

Firstly, an average investor inadvertently buys equity scheme at the top of the cycle by following herd mentality or chasing the FOMO rally. Second, an average investor exits after equities, has already fallen down substantially because of the fear and peer pressure of making higher losses.

But the secret to avoiding such mistakes is by not getting the timing wrong in the markets. It isn’t important to catch the exact top or the exact bottom. It is more important to avoid entering late when markets have already run up and avoid exiting even later when markets have already seen a large drawdown from the peak.

Managing the timing in investing is an essential part of generating a higher alpha over the benchmark whilst managing drawdowns efficiently.

One of the primary reasons that an average investor underperforms benchmark index is that he/she gets sucked by emotions and faces behavioral biases. To get detached from these emotions, a scientific approach is required to indicate when to invest and when to avoid investing in equities.

EMOSI is designed to act inversely proportional to the broad-based market indices because whenever markets are attractive EMOSI goes up and when markets are expensive EMOSI comes down. This enables an average investor to invest in equities to generate a potential alpha without making dramatic drawdowns.

Samco Mutual Fund will transparently disclose the EMOSI indicator of the benchmark index daily on its website.

EMOSI is represented by a range of values between 1-200 where 1 denotes the lowest margin of safety and 200 denotes the highest. EMOSI allows TimerSTP to transfer variable amounts ranging from 0.01X to 6X of base instalment via Systematic Transfer Plan (STP) approach from the source scheme to the target equity scheme depending upon the market levels and margin of safety.

It is built by collaborating a number of principles and concepts from both technical and fundamental analysis such as price to equity, Market cap to GDP, interest rate spreads, bond yields, moving averages, market breadth indicators, standard deviation, put call ratios and volumes. A mix of all the necessary moving parts in the investing universe have given rise to Samco’s very own EMOSI indicator.

Umeshkumar Mehta, CIO of Samco Asset Management Pvt Ltd said “With TimerSTP we are enabling an average investor to avoid entering the markets at the wrong time and sail through the market cycles efficiently. We build strategies by incorporating core investing principles and when embedded with technology becomes scalable product which will help all investors, big or small, by enabling them to generate higher risk adjusted returns in the long term.”

Viraj Gandhi, CEO of Samco Asset Management Pvt Ltd said “When markets are expensive TimerSTP through its internal smart engine of EMOSI will enable investors to invest just nominal amounts and when markets are attractive will allow investors to go all in and invest aggressively to generate far superior returns.”

Samco’s Overnight Fund is designed to incorporate the additional benefits of TimerSTP to make aggressive investments from the source scheme to the target equity scheme during panics but sits out and wait during euphoric times so as to avoid mistiming the market cycles.