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Published on July 4, 2007

The DCA is a periodic investment of a fixed amount in a particular stock or fund or in the market as a whole. The average value of the investment is supposed to rise over time, although it is not possible to foresee the intermediate highs and lows.

Currently, the overall mutual-fund market has offered the DCA, especially to long-term equity funds. Investors can choose which date they want their money to be deducted to contribute to the selected fund. With this method, investors may buy the unit trust at a high or low price.

However, Kampol Adsavakulchai, executive vice president of SCBAM's Mutual Fund Group, said the firm was now offering the new technique in a bid to allow investors to buy the unit trust at a lower average price.

The firm will send text messages to its investors, alerting them when the stock market declines for three days in a row. Then it will be up to the investors whether they would like to buy the unit trust on that day or not.

Kampol said that by this method, the investors' capital investment would be lower than adopting the DCA.

The firm collected the price data based on one of its long-term funds, SCBLT Plus, in which 90 per cent of the assets were invested in equities from early 2005 to February this year.

If the investors invested only at the end of December 2005 and 2006, the capital investment for this fund would be Bt11.24 per unit. By adopting the DCA, the average unit trust price would be Bt11.015 per unit. But if the investors adopted the three-day-drop-then-buy method, the average price would be Bt10.942 per unit.

Following the firm's data throughout this period, there were 295 occasions when the stock market dropped one day and rebounded the next. There were 38 occasions when the market declined for two consecutive days before it rebounded. There were 34 occasions when the market fell for three successive days before it rebounded. There were only 13 and four occasions respectively when the market dropped four and five days in a row.

Kampol said the firm was working on its information-technology system to support this project and expected it to commence within the third quarter of this year.

Besides using this method with long-term funds, the firm expects to apply the idea to its existing equity funds and Retirement Mutual Fund.

Currently, the firm offers six long-term funds, covering every range of risk. It has set the redemption period at eight months. It aims to generate fees from the redemption transferred from other asset-management firms' long-term funds.

Piyarat  Setthasiriphaiboon

The Nation