Samco Momentum for Long term and high-risk investors.
What is Samco Active Momentum Fund?
The fund aims to generate superior returns (adjusted for risk) by investing
in stocks that show momentum characteristics such as breakouts and price leadership.
Does the momentum strategy work well only in equity? No. It proved its merit with other commodities and forex over the years as per MSCI and research reports of Samco. Also, the MSCI research shows that the momentum factor has been one of the strongest generators of excess returns and has beaten the base index by 10x.
The existing momentum funds are index funds. It means they are passive, and the portfolios are rebalanced once in six months based on the inputs. Samco Active Momentum Fund — as the name suggests — is an active fund, which focuses on the opportunities that exist in the stocks.
The new fund will be open from June 15 to June 29 at a NAV of Rs 10.
Momentum over passive:
Active funds invest during times of momentum. When the markets are flat, these funds move the money into an arbitrage strategy. So, there will be a dull period and a vibrant period for the Samco funds. This fund will not follow market agnostic and it will deploy the money across market capitalisation, including the micro-cap.
Performance:
During the past 18 years, momentum index funds have outpaced the plain vanilla index Nifty Midcap index in 13 years. During this period, they gave higher returns — except during the bull phase in 2009 when they delivered 87 per cent against 113 per cent by Nifty Midcap 150 Index. Over 18 years, the absolute returns of the Nifty Midcap 150 Momentum 50 were 556.79 vs 433.68 by Nifty Midcap 150 fund. In terms of value, Rs one lakh would have grown to Rs 5.56 lakh vs Rs 4.33 lakh. This clearly shows that even in passive mode, the outperformance is very high. In an active phase, it has the potential to deliver returns higher than the 123 per cent achieved by the Momentum passive index fund.
Suitability:
Investors who intend to trade in stocks based on momentum and sell after a rally should consider this fund. But at times one would have noticed that the stocks could have rallied further from the time of selling.
Even if the fund has already appreciated by 40-50 per cent, if the algorithm reveals that there is huge potential for further upside, this fund will buy the stock and continue its journey till there is steam left in the stock. So, those willing to wait and take market risk can consider allocating 5-10 per cent of money towards this fund.