Investment Strategies

Proprietary Active Investment Strategies for the Discriminating Investor


When it comes to investing, there's never been one perfect approach. Markets go through cycles. They evolve and change over time. The strategies that work today may underperform next year, or even next month.

By utilizing a variety of active, top down strategies, our mission at Heritage Capital is to provide clients with strong returns throughout the full market cycle. Our clients benefit from "strategy diversification" as well as asset diversification.

Heritage Capital employs proprietary "active strategies" that are designed to take advantage of changing opportunities in the market, while preserving capital. We achieve this through our unique ability to tactically reposition assets when risk begins to outweigh reward.

Our individual strategies use a variety of non-emotional, quantitative decision rules based on hundreds of market indicators tracked by Heritage Capital on a daily basis. While some of our strategies trade frequently, others are maintained using a longer term time horizon.

We do not offer buy-and-hold investing or fixed asset allocation portfolios. Static investing, in our opinion, has far too much risk and few ways to limit the impact of significant market downturns.

But since our services are fee-based, frequency of trading has no impact on how we are compensated. Investment decisions are based solely on their perceived merit to the long-term value of the client's portfolio.

"I am personally not comfortable with the risk associated with buy-and-hold investing in my own portfolio. If I can't tolerate that kind of volatility, I certainly cannot expect my clients to." - Paul Schatz, President

Client portfolios are managed using a blend of our proprietary strategies designed to optimize return for a given level of risk that is acceptable to the individual. This blend is established after we have an opportunity to speak with our clients about specific needs, goals, risk tolerance and financial condition.


Conservative Investment Strategies
 Short-Term Gold Equities Program
 High Yield Bond Program
Conservative/Moderate Investment Strategies
 Spectrum Program
 Global Asset Allocation
 Dividend Income & Growth
Moderate Investment Strategies
 Diversified Growth Program
 Relative Strength Sector Program
Aggressive Investment Strategies
 Developed Markets Program
 Emerging Markets Program
 Aggressive Gold Equities Program
 S&P 500 Aggressive Growth Program

Heritage Capital's CONSERVATIVE Investment Strategies
Capital preservation outweighs appreciation in these investment approaches, followed by the goal of producing a respectable rate of return.
Short-Term Gold Equities Program  |  High Yield Bond Program

1.  Short-Term Gold Equities Program
Heritage Capital's Short-Term Gold Equities Program is a concentrated, risk managed sector program designed to participate in the short and intermediate-term rallies in the PHLX Gold/Silver Index (XAU) using the Gold Miners ETF, Rydex Precious Metals Fund and similar gold related instruments. When short and intermediate-term price declines occur, our objective is to position client assets in the safety of money market funds. Capital preservation and appreciation have similar weights in this actively managed strategy, but volatility and drawdowns are significantly below historical levels through the use of tight and stringent stop losses on all positions. 

This program is non-correlated to the U.S. stock market. Through its focus on short and intermediate-term moves, it has the potential to produce gains regardless of the longer-term market direction for precious metals mining companies. 
2.  High Yield Bond Program
Heritage Capital's High Yield Bond Program employs an intermediate-term momentum model that buys and sells appropriate high yield ETFs and mutual funds. Our goal is to participate in the high yield bond market with lower risk. Strict stop loss protection is a key element of this strategy to keep drawdowns at a minimum. The High Yield Bond Program offers capital appreciation, capital preservation and dividends. 

 Past performance is not indicative of future returns. All investment approaches have the potential for loss as well as gain.


Heritage Capital's CONSERVATIVE/MODERATE Investment Strategies
These programs seek capital appreciation with lower volatility while reducing the overall portfolio risk of a market downturn, which could erode your principal.
Spectrum Program  |  Global Asset Allocation  |  Dividend Income & Growth

3.  Spectrum Program
Our version of a multi strategy portfolio, this program combines four largely non-correlated strategies into one simplified plan, High Yield Bond, Short-Term Gold Equities, Relative Strength Sector and Diversified Growth for the wide diversification across our universe. Each of the four programs account for 25% of the overall Spectrum portfolio. 
4.  Global Asset Allocation
Based on the time-tested and highly successful Yale endowment model, this top down, actively managed, quantitative strategy offers diversified exposure to the global financial system across multiple asset classes. Primarily using exchange traded funds (ETFs), the world is broken down into U.S. equities, international equities, fixed income, commodities, currencies, real estate and private equity for weekly portfolio rebalances.

This long only program seeks to outperform the overall market with lower volatility and drawdowns from the use of non emotional, diligently researched, multi factor alpha signals and strict position limits. With low correlation to the U.S. stock market, capital preservation and appreciation have equal weights.

By reducing position limits, this strategy can be employed with lower overall risk, which is more in line with our other conservative programs.
5.  Dividend Income & Growth
This strategy begins with a 50% core holding in lower volatility dividend paying exchange traded funds (ETFs), usually in equities. As stock market conditions dictate, additional dividend paying ETFs may be added that hold equities, convertible bonds, preferred stocks, master limited partnerships (MLPs) and other dividend paying securities.

When the stock market climate indicates higher than normal risk, the core holdings can be hedged with ETFs and mutual funds that profit when a given index declines. Additionally, in extreme cases of risk, the hedge may be in the form of leveraged, inverse ETFs, which profit when a given index declines and sets the portfolio to have negative exposure to the stock market (short position).

 Past performance is not indicative of future returns. All investment approaches have the potential for loss as well as gain.


Heritage Capital's MODERATE Investment Strategies
These programs seek market rates of return while reducing the overall portfolio risk of a market downturn, which could erode your principal.
Diversified Growth Program  |  Relative Strength Sector Program

6.  Diversified Growth Program
This is a top down, risk managed index strategy with the ability to take long, short and neutral positions in the S&P 500, S&P 400, Russell 2000 and NASDAQ 100 or Rydex index funds that track the various indices. Two distinct and independent models are used in this strategy; one that focuses on the long-term, while the other looks at the intermediate-term. Both models have trend following as well as mean reversion rules to account for the different market environments.

The strongest performance periods occur when both models are in agreement and weakness is bought or strength is sold. Positions are typically held from a few weeks to several months.
7.  Relative Strength Sector Program
Each week from a large universe, Heritage Capital's proprietary computer models select one to four top performing U.S. market sectors, including cash, that indicators predict offer the highest potential reward. This actively managed strategy is then implemented using exchange traded sector funds and the Rydex sector funds as well as sector funds within variable annuities from Jefferson National, Security Benefit Life and Nationwide's MarketFlex.

Positions are modified and rebalanced as often as weekly to meet our goal of investing assets in the top performing sectors. Although this is a trend-following strategy, the risk management component uses mean reversion looking at the overall market and begins to impact investment decisions when any two of our three market models go negative. Capital appreciation far outweighs preservation in this approach.

 Past performance is not indicative of future returns. All investment approaches have the potential for loss as well as gain.


Heritage Capital's AGGRESSIVE Growth Strategies
Heritage aggressive growth programs are designed to capture "alpha," returns above and beyond those available from the equity markets as a whole. These programs tolerate a much higher level of volatility, as capital preservation is incidental compared to the sole focus on appreciation.
Developed Markets Program  |  Emerging Markets Program
Aggressive Gold Equities Program  |  S&P 500 Aggressive Growth Program

8.  Developed Markets Program
Heritage Capital's Developed Markets Program invests in the equity markets of established economies outside of the U.S., such as Australia, Canada, France, Germany, Italy, Japan, and United Kingdom. Each week, our proprietary computer models select from a universe of exchange traded funds (ETFs) one to three top performing developed markets that appear to offer the highest potential reward. Capital appreciation far outweighs preservation in this actively traded strategy using ETFs.
9.  Emerging Markets Program
From a universe of emerging market country exchange traded funds (ETFs), which include Brazil, China, Hong Kong, India, Mexico and Russia, Heritage Capital's proprietary computer models select one to three top performing markets that offer the highest potential reward. Positions are reviewed and updated weekly, or even daily if circumstances warrant faster action. Trend following and mean reversion indicators place key roles in trading decisions. Capital appreciation far outweighs preservation in this actively traded, aggressive strategy using ETFs. 
10.  Aggressive Gold Equities Program
The Aggressive Gold Equities Program is a long and cash, classic mean reversion based strategy that utilizes the Rydex Precious Metals Fund and similar ETFs to express its view. Designed to participate in the intermediate-term rallies in the PHLX Gold/Silver Index (XAU), this concentrated program seeks to buy weakness and sell strength using various conventional technical indicators in a proprietary fashion. Trades last as little as a week to a few months depending on market conditions.  Research has shown that the most profitable trades tend to lean towards the shorter term, while the largest drawdowns usually involve longer holding periods.

This strategy has an aggressive risk/reward profile with moderate correlation to the price of gold and the gold & silver mining stocks. It is non-correlated to the U.S. stock market.
11.  S&P 500 Aggressive Growth Program
The S&P 500 Aggressive Growth Program is a very aggressive long, short and cash strategy designed to produce positive returns regardless of market conditions over a period of 12-18 months while significantly reducing overall stock market exposure.

First, the strategy determines the overall, long-term trend of the S&P 500. Intermediate trend is then analyzed to determine periods of agreement with the long-term trend, in which case, trading opportunities will exist when the short-term trend moves against the intermediate and long-term trends. If the intermediate trend is not in agreement with the long-term trend, the model will remain in the safety of the Money Market fund.

Two beta (leveraged) mutual funds and/or ETFs are employed to express our view and achieve the aggressive nature of the program. This strategy has a very aggressive risk/reward profile and is not correlated to the U.S. stock market.

 Past performance is not indicative of future returns. All investment approaches have the potential for loss as well as gain.

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