Welcome to the new Carson portfolio. With the advent of the Carson we add another investing model to our arsenal. With few exceptions, ITA portfolios operate on the premise that momentum is a sound foundation for constructing portfolios. The Carson is quite different in that it can be classified as a contrary investing model. With the Carson, sector ETFs are purchased when they are out-of-favor (positioned in the over-sold zone) and sold when they reach the Bullish Percent Indicator (BPI) over-bought zone. Additional information is provided below and as investors follow the Carson model they will see how this investing system operates.
Carson Investment Quiver
To launch the new Carson, I transferred all assets from the Carson BHS and Carson HA over to the Carson LRPC and then changed the name from Carson LRPC to Carson. As readers will recall, $10,000 was placed in each of the original Carson portfolios. That is why this new Carson is a portfolio in the mid-$30,000 range.
Investing Logic: How will this new Carson be managed?
- Populate the investment quiver with 10 sector ETFs. I am using Vanguard ETFs in this portfolio.
- Add a short-term low volatile treasure (SHV) and an inflation protection security (SCHP) to the 10 sector ETFs.
- After the market closes each week, examine the position of each of the 10 sector ETFs.
- If a sector reaches the over-bought zone (70% or higher on the bullish scale) place a 2% or 3% Trailing Stop Loss Order (TSLO) under the ETF.
- If a sector ETF reaches the over-sold zone, purchase the ETF. Buy at market or place a limit order very close to the closing price of the sector ETF.
- The Carson is reviewed every seek as the Bullish Percent Indicators (BPI) will change from week to week.
- Expect the majority of the sector ETFs to spend most of their time between the 30% and 70% zones. During this period invest in either SCHP, SHV, or remain in cash.
- When two or more sector ETFs are a Buy, use the ranking system found in the 5th column from the right in the worksheet shown below. Specific decisions as to how many shares to purchase will be explained when this first occurs sometime in the future.
Carson Performance Data
Since positions and cash were transferred from the Carson BHS and Carson HA into the Carson LRPC, I’ll build on prior data collected for the Carson LRPC portfolio.
After the transfers yesterday and using current prices, the Carson is besting all possible benchmarks by a wide margin. Will the Carson BPI portfolio expand or contract this percentage difference? That is the key question.
Carson Risk Ratios
It will take at least a year to know if the Carson – BPI model is workable and beneficial to investors.
The Treynor is very high due to a significant percentage of the portfolio being in cash. Holding cash reduces the portfolio beta and that in turn raises the Treynor Ratio.
The new Carson kicks off with one of the lowest Jensen values over the past year so we are not creating something out of the ordinary.