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Samco Mutual Fund’s TimerSTP – Time your lumpsum investment right


Samco Mutual Fund launched its Overnight Fund on September 26 and along with it, its TimerSTP facility. The TimerSTP is a tool that will enable the fund house’s lumpsum investors to deploy their one-time investment in the Samco Overnight Fund (source scheme) into an equity scheme (Samco Flexi Cap Fund, as of now) over a period of time. That is, do an STP or a systematic transfer plan from the fund house’s Overnight Fund to the Flexi Cap Fund. As the fund house launches more schemes, the TimerSTP can be used for systematically transferring money from the Overnight Fund to other funds too.

The deployment will happen in line with market levels, that is, money will be invested cautiously when the markets are at a high and aggressively, when they are at a low.

According to the fund house, the TimerSTP will operate on its proprietary Equity Margin of Safety Index (EMOSI) indicator which is based on the margin of safety investing principle and derived from factors such as price-to-earning mutile, G-Sec yields etc. This indicator is displayed on the fund house’s website regularly and can range from a value of one to 200 where 1 denotes the lowest margin of safety and 200 denotes the highest. So, when the markets turn expensive, the EMOSI will be lower and the TimerSTP will invest cautiously.

Under this facility, variable amounts will be transferred from the Overnight Fund to the target scheme with periodic amounts ranging from a minimum of 0.01X (or Rs. 100, whichever is higher) to 6X of the base instalment. The base instalment is arrived at by dividing the one-time lumpsum investment amount by 12. So, when the markets are expensive, the TimerSTP will deduct a lower multiple of the base instalment from the source scheme, and vice versa.

For example, if you make a one-time investment of Rs. 30,000, then your base instalment would come to Rs. 2,500 and the TimerSTP will invest amounts ranging from Rs. 100 to Rs. 15,000 until the entire Rs.30,000 gets transferred into the target scheme.

An illustration provided by Samco Mutual Fund based on past data (rolling returns between January 2005 till July 2022), shows that a TimerSTP would have provided a 3-year return (CAGR) of 13.5% compared to 9.3% for a 12-month normal STP and 8.2% for a 36-month normal STP. Going by 5-year returns, the TimerSTP would have returned 11.6% compared to 9% for a 12-month normal STP and 8.3% for a 36-month normal STP.

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