Q & A with Chuck Carlson: Friend to the Small Investor

This posting is a question and answer session with Charles B. Carlson. Mr. Carlson is a prolific author and nationally recognized expert on dividend reinvestment plans. Carlson is a chartered Financial Analyst and holds a MBA in business from the University of Chicago. His commentary has appeared in publications such as Barrons, Forbes, Business Week and Kiplinger’s Personal Finance. Mr. Carlson has also appeared in numerous radio and television programs including CNBC and CNN.

We reached Chuck via email this afternoon.

1. Can you please tell us a bit about yourself? About Horizon Investment? How long have you been in business? Who are your clients?

I have worked at Horizon for 26 years. I’m a rarity in that it is the only place I have worked since graduating from Northwestern University in 1982 with a degree in Journalism. I also have an MBA from University of Chicago and am a Chartered Financial Analyst (CFA). I have written eight books. Our company does two things – we publish investment newsletters via Horizon Publishing; and we manage money via Horizon Investment Services. We currently manage about $170 million in separately managed accounts and consult on an additional $800 million in institutional assets. Our clients are typically affluent individuals, including retirees, professionals, and business owners. Horizon Publishing has been publishing investment newsletters since 1946. Horizon Investment Services has been in business since 1998.

2. What are the ways you find most of Horizons clients have been successful in building wealth?

Simply put, our clients have saved and invested. It’s really quite simple – save and invest. When you save, you not only save today’s dollars, but tomorrow’s dollars. Indeed, spending begets spending. When you buy stuff, you usually need to spend to support the stuff you buy. Thus, spending is a negative multiplier. Wealthy people save and then invest in the stock market.

3. Given current market conditions how would you recommend adjusting one’s portfolio? How are your clients reacting to changing economic circumstances?

We think this is a bull market (the primary trend just changed to a bull market), so we are recommending a pretty high exposure to stocks – perhaps 85%, with 15% in cash. I think people need to use the current turbulence to upgrade portfolios so they are positioned to benefit when the next up leg occurs.

4. Horizon’s website mentioned that your business model involves the Dow Theory forecasts. For those who don’t have much investing experience, can you share Horizon’s investing philosophy and the rationale behind it with our readers?

The Dow Theory, developed by Charles Dow in the 1890s (Dow was the first publisher of The Wall Street Journal), looks at the performance of the Dow Jones Industrial and Transportation Averages. In a nutshell, when these two averages are moving in sync to higher highs, the primary trend is bullish. When they are moving in tandem to lower lows, the primary trend is bearish. We incorporate the Dow Theory into our asset allocation model. For individual stock selection, we rely heavily on our Quadrix stock-rating system. Quadrix looks at more than 5,000 stocks. Each stock is ranked on more than 100 different metrics. Thus, Quadrix provides a disciplined, consistent approach to evaluating stocks.

5. From what I gather, Horizon works with affluent families to meet their financial goals. Do you find that married couples have a different dynamic when it comes to making and managing money compared to single people? How do you think that marriage changes how people deal with money?

We really don’t have that many single clients. I do believe married couples generally work as a team. However, this is not always the case, especially if this is the second or third marriage. In those instances, it is not unusual for married couples to look at their assets individually – what is mine is not necessarily his, and vice versa.

6. You are also known as an advocate for dividend reinvestment programs (DRIPS). Can you please explain what DRIPs are and their advantages for the beginning investor?

DRIPs are programs that allow investors to buy stock directly from companies. They buy stock by having dividends reinvested and by making additional investments. The appeal of DRIPs is that you don’t need a lot of money to start – oftentimes as little as $50 or $100. Also, DRIPs, for the most part, are very fee friendly. Also, many plans allow investors to buy their first share and every share directly from the company. Finally, more than 1000 companies offer them, including many quality blue chips. This is self-serving, but our newsletter, DRIP Investor, provides an excellent tool for learning about DRIPs. You can get a free copy of DRIP Investor by calling (800) 233-5922 or visiting our Web site at www.dripinvestor.com.

You can learn more about Chuck Carlson’s books here.

To reach Carlson’s Horizon Investments go here.

To check out Chuck’s writing at Forbes, click this link.