How it works
Though the objective is to invest smaller amounts at higher market levels and higher amounts at lower market levels, the fund house prefers to market it as an enhanced version of Systematic Transfer Plan (STP). Under this scheme, investors deposit their money in a select liquid or debt fund of Reliance Mutual Fund and variable amounts are then transferred to the selected equity scheme on the basis of a model.
The model does not calculate the monthly STP amount, rather it decides whether the stock market is cheap or expensive. If expensive, it will invest a minimum amount. If cheap, it will invest the maximum amount. If trading in a narrow range, it will invest according to the medium value.
The system would calculate the monthly amount to be transferred two trading days before the transfer date (10th of every month). The actual amount shall be transferred from the liquid/debt scheme to the equity scheme on the 10th of every month.
Our View
The aim of this model is simple: To enable investors invest more when the market is positioned at a lower level and invest less when it is positioned at higher level. But it not simple to grasp and the investor has way too many decisions to make. The investor first of all has to make a selection from various liquid or debt schemes. Then he will have to determine which equity fund the money must go into. After that, he has to select one plan out of five. And while the scheme is based on a proprietary scientific model, it is not very clear what parameters are used to determine where the Sensex is positioned.
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