Samco Mutual Fund introduces “TimerSTP”TimerSTP is a tool that determines the right time to invest more and the time to invest less in equities with the help of Samco’s proprietary Equity Margin of Safety Index (EMOSI) indicator which is based on the margin of safety investing principle. Therefore, when markets are high, EMOSI signals to invest cautiously, and when markets are low, allows investing 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.
The premise of TimerSTP lies in 2 common mistakes an average investor makes. Firstly, an average investor inadvertently buys equities at the top of the cycle by following herd mentality or chasing the FOMO rally. Second, an average investor exits after equities, or a particular stock 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.
SAMCO’s Overnight Fund is designed to incorporate the additional benefits of TimerSTP to make aggressive investments from the source scheme to the target scheme during panics but sits out and waits during euphoric times so as to avoid mistiming the market cycles.
For the first time in India, SAMCO AMC to disclose daily EMOSI of the benchmark index.
One of the primary reasons that an average investor underperforms the 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 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.
Nirali Bhansali, Fund Manager, Samco Mutual Fund said “SAMCO Mutual Fund’s endeavor is to empower retail investors and provide solutions that allow them to make smarter decisions in their investment journey. 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 leveraging technology so that all investors, big or small, can benefit by making higher risk adjusted returns in the long term.”
Anantharaman S, Zonal Head South, Samco Group said “We are excited to expand our business in Chennai and launch the Overnight Fund with our proprietary TimerSTP. Based on our back tested results, our EMOSI acted as a perfect lumpsum indicator because as EMOSI goes up, the average 3/5 year returns also go up and vice versa.”
