Schultz Financial Mgmt Corp

 

Risk-Controlled Portfolios for Serious Investors

 
   

   

 

 

 

 

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Investment Strategy 

 

 

 

 

 

Trend-Global ETFs

 

Investment Strategy Statistics

(As of 12-29-2006)

 

Trend

Global

ETFs 

 S&P 500 Index 
2007 Return 15.11%

11.71%
2006 Return 20.59%

15.60%
2005 Return 16.77% 4.90%
2004 Return 11.07% 10.71%
2003 Return 27.70% 28.30%

 

Investment performance figures are based on actual results of a representative client.  These figures are net of a maximum 1% investment management fee for accounts greater than $500,000. 

 

Objective

 

Our research has demonstrated that within the global stock market, different regions or countries tend to rotate in and out of favor for periods of time lasting from a couple of months to a year or more.

 

The objective of this strategy is to achieve above average returns in stocks by investing in the strongest performing stocks markets using exchange trade funds ("ETFs") during up-trends.  During down-trends we will preserve capital by switching to money market funds.  The benchmark index for comparison is the S&P 500 Composite Index. 

 

Investment Approach:

 

We normally invest in three to five of the best performing exchange traded funds.  These funds include US style specific funds, international regional funds, country specific funds, as well as some sector and commodity funds.  We compare trends of these various ETFs on a risk adjusted basis.  The amount invested in each ETF will vary depending on the risk it contributes to the investment strategy.   During market downtrends, this strategy will switch mostly into a money market fund in order to preserve capital. 

 

Some of the ETFs we use are listed below:   

 

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Large Cap Value Stocks  ( IVW )

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Large Cap Growth Stocks  ( IVE )

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Mid Cap Value Stocks  ( IJJ )

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Mid Cap Growth Stocks  ( IJK )

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Small Cap Value Stocks  ( IJS )

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Small Cap Growth Stocks ( IJT )

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Real Estate Sector Stocks ( IYR )

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Consumer Staple Sector Stocks (XLP)

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European Stocks ( IEV )

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Japanese Stocks ( EWJ )

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Latin America Stocks (ILF)

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Pacific Excl Japan (EPP)

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China (FXI)

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Gold Bullion (GLD)

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Over 30 other country specific funds

 Back-Test

We performed a simulated "back-test" to validate the effectiveness of our proprietary market timing strategy for stocks prior to 2003.  The test results are shown below:

 

Year    Timed   S&P 500

1994       6.6%        1.3%

1995     22.2%      37.6%

1996     26.8%      23.0%

1997     27.5%      33.5%

1998     19.4%      28.6%

1999     75.2%      21.1%

2000     17.9%       -9.1%

2001     12.1%     -11.9%

2002      -3.4%     -22.2%

 

Our back-test simulation used daily closing price data of exchange traded funds and mutual fund data from 1994 though 2002. 

 

Since many exchange traded funds (ETFs) that we use did not exist prior to 2000, mutual funds that closely resembled those ETF indexes were substituted for the purpose of performing our simulated back-test. 

 

The simulated back-test performance shown above does not include the cost of money management, trading costs, or potential costs associated with inefficient trade execution.  Therefore actual returns could have been considerably less than those shown above.  

 

We believe that the back-test simulation clearly demonstrates that our timing strategy does reduce downside risk associated with a prolonged "bear market".  

 

   
   

 

© Schultz Financial Management 2002