Samco Asset Management Pvt Ltd (Samco AMC) today (26 September) launched TimerSTP along with Overnight Fund. In a statement, the AMC said that TimerSTP is a tool that determines the right time to invest more and the time to invest less in an equity scheme. To do so, the tool takes help of Samco’s proprietary Equity Margin of Safety Index (EMOSI) indicator, which is based on the margin of safety investing principle.
Samco said 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 and, removes the stress of tracking the markets constantly while offering a higher reward/risk ratio.
As per the statement, Samco will disclose the EMOSI daily. It said that the premise of TimerSTP lies in two common mistakes an average investor makes:
- Firstly, an average investor inadvertently buys an equity scheme at the top of the cycle by following herd mentality or chasing the FOMO rally.
- Second, an average investor who 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,” the statement said.
“Managing the timing in investing is an essential part of generating a higher alpha over the benchmark whilst managing drawdowns efficiently,” it added.
The AMC said that its Overnight Fund has been designed to incorporate the additional benefits of TimerSTP.
How EMOSI works
EMOSI has been 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. SAMCO said this enables an average investor to invest in equities to generate a potential alpha without making dramatic drawdowns.
Samco AMC said 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.
“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,” said Umeshkumar Mehta, CIO of Samco Asset Management Pvt Ltd.
“Just like in world-class cricketing, there is a time to hit the ball when it is safe and miss the ball when it is risky, similar principles are brought in for the investors by Samco through the launch of TimerSTP. 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,” added Viraj Gandhi, CEO of Samco Asset Management Pvt Ltd.
(Disclaimer: Mutual fund investments are subject to market risks. There is no guarantee or assurance that any investment strategy will help you meet the desired goals)