Business

Samco Mutual Fund STP Timer – Timing Your Huge Investment

Samco Mutual Fund launched its Overnight Fund on September 26 and with it the TimerSTP facility. TimerSTP is a tool that will allow large investors of a fund company to roll their one-time investment in the Samco Overnight Fund (source scheme) into an equity program (Samco Flexi Cap Fund, up to the present time) over a period of time. That is, implement an STP or a systematic transfer scheme from the fund’s Overnight Fund to the Flexi Cap Fund. As the funder launches more programs, TimerSTP can also be used to systematically transfer funds from the Overnight Fund to other funds.

The rollout will take place in line with market levels, i.e. money will be prudently invested when the market is high and aggressively when it is low.

According to the fund house, TimerSTP will operate on the Exclusive Equity Margin of Safety Index (EMOSI), which is based on the rate of return on the principle of safe investment and is derived from factors such as price into low income, G-Sec yield, etc. This index is displayed on mutual fund websites frequently and can range in value from one to 200, where 1 represents the lowest level of safety. and 200 represents the highest. So when the market becomes expensive, EMOSI will be lower and TimerSTP will invest cautiously.

Under this basis, variable funds will be transferred from the Overnight Fund to the target program in recurring amounts ranging from a minimum of 0.01X (or Rs 100, whichever is higher) to 6X of the base installment. The base is calculated by dividing the one-time investment by 12. So when the market is expensive, the TimerSTP will subtract the lower multiple of the base from the source scheme and vice versa.

For example, if you invest one time Rs. 30,000, then your basic installment will come to Rs. 2,500 and TimerSTP will invest amounts ranging from Rs. 100 to Rs. 15,000 until the entire Rs 30,000 is transferred to the target program.

An illustration provided by Samco Mutual Fund based on past data (rotating returns from January 2005 to July 2022), showing that TimerSTP will provide a 3-year return (CAGR) of 13 .5% versus 9.3% for 12 months of normal STP and 8.2% for 36 months of normal STP. With a 5-year yield, TimerSTP will return 11.6% versus 9% for a 12-month normal STP and 8.3% for a 36-month normal STP.

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