Schultz Financial Mgmt Corp

Risk-Controlled Portfolios for Serious Investors

Our Risk-Controlled Approach

Schultz Financial Management has an investment philosophy centered around a single belief - that the key to consistent, long-term success is achieving an optimal balance between enhancing return and managing risk. 

We have developed a unique systematic and disciplined approach to managing risk-controlled investment portfolios for our clients.

We seek to earn attractive investment returns while managing portfolio risk through a combination of diversification and trend following techniques as described below.  

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1.  Diversification by Asset Class

Total Returns Using 4 Asset Classes

Data Source:

Cash Equivalents:  Ryan Labs 3-Year GIC Index

Bonds: Lehman Aggregate Bond Index

Real Estate Inv. Trusts:  Wilshire REIT Index

Stocks:  S&P 500 Index

2.   "Core" High Quality Investments

During periods of economic or political uncertainty, the stock and/or bond markets may come under extreme pressure causing a "flight to quality" among investors.  When this occurs, high quality bonds and large "blue chip" stocks will perform better than less favored lower quality issues.

For this reason, we believe that only high quality assets should be assigned a "core" long term position in an investment portfolio.

"Core" Allocation

Core Stocks:  Typically our core allocation is invested in a basket of leading Large Growth stocks and / or dividend paying Large Value stocks.  As part of a core position, it is our intention that these baskets will remain fully invested in stocks throughout a normal business cycle.  As an active manager, we monitor and replace stocks as appropriate in order to reduce risk and enhance return.

Core Bonds:  Rather than buying bond mutual funds that can result in a loss of principal, we prefer to buy high rated individual bonds.  If interest rates rise, we can hold these bonds until they mature to ensure a full return of principal and interest.  The individual bonds in our High Quality Bond strategy are selected based upon the type of account, tax bracket, and income needs of the client.  The Trust Deed Fund which invests in real estate backed mortgages may also be held as a core position.

3.  "Trend Following" Investments

The "trend following" portion in our managed portfolios is designed to quickly adapt to current market trends in order to capitalize on shorter term opportunities.  Most important however, is our ability to preserve capital by switching to cash during market downturns.

For both stocks and bonds, we use proprietary trend following "market-timing" indicators that we monitor on a daily basis.    

 "Trend Following" Allocation

Market Timed Stocks:  This consists of multiple market-timing strategies.  Each strategy uses a trend following approach to participate in stocks that are experiencing strong upward momentum, but employs a hedging strategy and / or switches to a cash position during market declines.

The Timed Stock Fund strategy in normally invested in 3 exchange traded funds ("ETFs") from a candidate list of style and sector funds that include large growth, large value, mid-cap growth, mid-cap value, small-cap growth, small-cap growth, real estate, consumer staples, gold bullion, Japan, Europe, Latin America, and Pacific (excl Japan).  During market down trends, this strategy will be  invested in a money market fund.

The Timed Large Growth Stock strategy is invested in individual large cap growth stocks that are experiencing strong earnings growth and price appreciation.  While diversified, this strategy will tend to be over weighted in stronger performing sectors and industry groups.   During market down trends, stock exposure is reduced and a hedging instrument is used to protect against further stock market declines. 

In a similar manner, the Timed Mid-Cap Growth Stock strategy is invested in individual mid cap stocks.

Market Timed Bonds:  Our Timed Bond Fund strategy is normally invested in a corporate high yield bond fund.  During down trends in high yield bond funds, the strategy may invest in either a high quality bond fund or a money market fund. 

4.  Hybrid Strategies that Reduce Risk

Hybrid strategies can add diversification to your portfolio and reduce risk.  For conservative investors, we may recommend these strategies as less risky alternatives to ownership of stocks or traditional stock mutual funds.  Of the many hybrid strategies available, we use strategies that have historically realized long-term returns comparable to stock market averages but with much less risk. 

The Long / Short Strategy is invested in a diversified group of stocks and short the stock market average.  The objective of this strategy is to provide a conservative way to invest in stocks that can make money when the overall stock market is going up or down. 

The Covered Call Fund implements a strategy of owning stocks and hedging the downside risk in those stocks by selling stock options for additional income.  However, as stocks increase in value, gains in the stocks may be partially reduced as a result of losses that occur from selling options.

The Convertible Fund owns convertible bonds and convertible preferred stocks.  These convertible securities may be converted to common stock of the issuing company at a predetermined price.  This type of fund has upside appreciation potential similar to common stocks, but because of the attractive dividend income generated from these convertible securities, the downside risk is significantly reduced.