Investment Management
Money Doesn’t Have to be Complicated.
By leveraging a disciplined investment process, you receive transparency of information, seamless proactive service and the trust and accountability you need to pursue your financial objectives.
Our Investment Philosophy
Our investment philosophy is built on a blend of disciplined core holdings and strategic satellite positions, designed to adapt to evolving macroeconomic conditions while keeping costs low and maintaining a focus on quality investments.
Core Holdings: Passive & Active Mix
The foundation of our portfolios consists of a mix of passive and active ETFs. We allocate 50% of core holdings according to Carson House views, balancing exposure across asset classes. To minimize expense ratios, the majority of core holdings are invested in passive indexes and low-cost ETFs.
Satellite Positions & Macro Tilts
Satellite positions complement the core holdings by offering tactical tilts based on macroeconomic conditions. The Carson House View Strategic strategy reflects the long-term asset class views of the Carson Investment Research Team. These strategies use ETFs with varying exposure to domestic and international stocks, bonds, and alternatives such as commodities and real estate, depending on the investment objective. The team may overweight certain asset classes based on the collective house view and rebalances as necessary when the views are updated. The strategies are benchmarked to a custom combination of the MSCI ACWI NR Index and the Bloomberg US Aggregate Bond Index, and they are designed to serve as the core of a portfolio.
Satellite positions may also include alternative asset classes to enhance diversification and capitalize on evolving market opportunities, allowing flexibility to adjust based on changes in the economic environment.
Expense Efficiency
To keep costs low, core holdings prioritize passive and low-expense ETFs, allowing us to offer broad market exposure without unnecessary fees. Active funds are selectively added where they can offer the potential for superior value relative to cost.
Quality Tilt & Focus on Free Cash Flow Yield
Rather than tilting portfolios toward growth or value, we prioritize quality. This is achieved by focusing on investments with strong Free Cash Flow Yield and selecting funds and stocks with sustainable competitive advantages, as identified by Morningstar’s “MOAT” framework. This helps ensures that the portfolios remain resilient and focused on long-term value creation.
Regular Reviews & Adjustments
Portfolio allocations are reviewed and adjusted at least annually and potentially quarterly to stay aligned with Carson House views and prevailing market conditions. Changes are made based on macroeconomic events and the performance of individual funds within core holdings. Underperforming funds may be replaced to focus on portfolio optimization strength while maintaining the integrity of the overall strategy.
Secondary Cash Reserve Accounts
To further enhance stability and liquidity, secondary cash reserve accounts are built using cutting-edge portfolio construction techniques. These reserves can utilize structured ETFs, options strategies, and alternative income generation to provide a low-risk buffer. The goal is to maintain an extremely low standard deviation and minimize market risk, with a focus on the cash reserve accounts acting as a reliable, stable source of capital in volatile market environments.
This disciplined approach seeks to provide a balance of risk and return while keeping the focus on long-term growth, expense management, and portfolio adaptability in the face of changing market conditions, with the additional benefit of stable secondary cash reserves to further safeguard assets.
Index Definitions
Bloomberg Barclays US
Aggregate Bond Index
The Bloomberg Barclays US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moodys and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 8.25 years. This total return index, created in 1986 with history backfilled to January 1, 1976, is unhedged and rebalances monthly.
MSCI All-Country
World Index
The MSCI All-Country World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The SMCI ACWI consists of 46 country indexes comprising 23 developed and 23 emerging market country indexes. The developed country indexes include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The emerging market country indexes included are: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
In-House Investment Support
Using a combination of the latest technology and our team of financial professionals, we regularly monitor your portfolio to ensure you are taken care of. While working with your advisor, you will build out your model and continually evaluate your portfolio in order to help you towards your goals.
How Do I Know Which Investment Strategy Makes the Most Sense for Me?
There are many factors that affect choosing an investment strategy. The first set of factors begins with you, our client. Our disciplined discovery process is key to understanding the right investment strategy for your specific situation. Once we have the answers from our clients, we begin to think about the second category of factors which involve the overall health of the economy.
There are many factors that affect choosing an investment strategy. The first set of factors begins with you, our client. Our disciplined discovery process is key to understanding the right investment strategy for your specific situation. Once we have the answers from our clients, we begin to think about the second category of factors which involve the overall health of the economy.
Here are common questions we ask as we walk through the investment planning process:
- What is the goal of the funds? Are they to be used now, at some point in the future, or are they funds you would like to leave as a legacy?
- What are the expectations you have for these funds when it comes to risk and reward?
- What part of your portfolio do the funds we are investing represent? What percentage do they represent in your liquid portfolio and overall portfolio?
- Are the funds qualified for tax deferral?
- What is your comfort level with investing, or how much investment expertise do you have?
The initial discovery process has to be thorough, which is why top financial advisors will include financial planning, not just investment management, as part of the services they provide to their clients. We believe all of our clients should have a financial plan, which is why we view it as the skeleton of the process.
Once we get to know our clients and we have walked through the basics, we decide whether we need to create the asset allocation plan or simply find the spot in which the funds we are going to invest fit within an already established plan. To determine our path, we ask ourselves:
- What is the current state of the domestic and global economy?
- What is the state of the local economy?
- Where are we in the business cycle?
- How are certain industries and sectors performing relative to each other?
- What is our team’s overall expectation of the market?
By combining the client factors and economic factors, we are very comfortable to make the asset allocation decisions. This is when we determine the answer to one very important question:
Do I need to make an allocation to irreplaceable capital?
Irreplaceable capital is the amount of money we must protect from a downturn in the market. This is different than clients not wanting to lose money; no one likes to lose any money. And while that seems obvious, there are reasons why some may overreact to investment losses.
- Emotionally, we all feel losses more than wins.
- No. 1 is not only an emotional response but also a logical response. If you lose 20% of $1 million, or $200,000, you will have $800,000. If you only earn a 20% return on the $800,000, you will have $960,000! So you need a 25% return on your money to get back to the original investment. You need more money to get back to where you started. Feel that discomfort?
Irreplaceable capital is money that must be preserved as much as possible because if it’s not, you may suffer a major change in lifestyle, which could even change the entire financial plan.
Once we have made a choice on irreplaceable capital, we then need to go back to our client factors. Do you need the income from the portfolio in the near future? If so, then we will choose a strategy which provides income. We may choose a combination of the tried and true dividend paying stocks, some capital appreciation and bonds. We may also incorporate more advanced investment strategies that require very experienced management and trading.
Some clients may choose an allocation of growth and alternative investments because of the potential for return and diversification. These two allocations may be a smaller part of the portfolio or a larger part, this all depends on timing. We may view domestic investments as more or less risky, and we may use global investment strategies to ensure we have diversified investments in the portfolio. The key here is to educate and prepare clients regarding the added risk.
Time plays a critical role in developing strategies for retirement. During retirement planning sessions, you may be in the first stage of accumulation and have recently began to save and invest. In this situation, we may start with a more growth oriented strategy approach. However, this all depends on the answers to the initial client questions. Just because you recently started investing or you are a younger person, it doesn’t mean we automatically put you in a growth strategy and send you on your way.
If you are approaching retirement age, we may choose to sell growth investments. Let’s pretend we have a couple of great years in the market, we may save two years’ worth of funds needed to cover fixed living expenses and move them into an irreplaceable capital strategy to preserve your wealth in case there’s a market downturn the year you retire. It will allow us to preserve a cushion of time in which we don’t have to sell other shares at a lower price point.
When it comes to strategy selection, it is important to keep in mind the two categories in building a disciplined investment process. Combining investment management and financial planning provides us with guidance to create the right roadmap. We must focus on both the client category factors as well as the economic factors and work with each in tandem to create the best investment strategy for you.
This content is for general information only and is not intended to provide specific advice, an endorsement or recommendations for any individual. No strategy assures success or protects against loss. To determine what is appropriate for you, consult with an advisor. Alternative investments can be volatile and you should be aware that you may lose all or a portion of your investment. Additional risks are associated with international investing, such as currency fluctuations, political and economic stability, and differences in accounting standards. A diversified portfolio does not assure a profit or protect against loss in a declining market. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns.
Private: The (True) Cost of Investing: Why Fee Transparency is Critical to Determining Underlying Investment Value
While investment fees and expenses are required to be disclosed through investment prospectuses, layers of complexity, financial jargon and “hidden” fees can make it difficult for investors to understand the true underlying investment costs and the impact expenses have on their investment returns.