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Milne
Milne

me and my money

This investor splits his portfolio into four buckets Add to ...

Gary Milne

Occupation

Retired IT professional

The portfolio

Includes four buckets: 1) Bank savings accounts and term deposits; 2) “Strong companies with a moderate yield” such as Exelon Corp. and Intel Corp.; 3) Stocks and ETFs with “a strong monthly dividend” such as the SPDR Dow Jones Industrial Average ETF; 4) Stocks with growth potential such as Taser International Inc. and Sequans Communications SA.

The investor

As an IT professional, Gary Milne was focused on investing in technology companies during the 1990s and 2000s. “Now, I appreciate a balanced portfolio that encompasses growth and dividends,” he says.

How he invests

Mr. Milne keeps 75 per cent of his money in the first three buckets, which are made up of income investments with little to moderate risk. These buckets help bring his stock allocation down to a stance more fitting for a retiree.

An example of an income holding is Exelon, a U.S. utility involved in electricity generation, distribution and marketing. Its dividend yields 3.9 per cent.

To boost income, Mr. Milne sells call options on his dividend stocks (the buyer of a call option acquires the right to buy shares at a specified, or strike, price within a certain period of time). Selling call options on Exelon stock has been particularly rewarding: The extra income boosted the income yield to 8.7 per cent over the past year. However, if the stock price ever rises to the option’s strike price, he will have to sell his shares and forgo capital gains beyond his selling price.

Mr. Milne’s background in information technology gives him a solid basis for identifying companies positioned to benefit from technological trends. So, he still invests in technology companies but only allocates 25 per cent of his capital to them, in the fourth bucket of his portfolio.

In 2009, he bought long-term call options on Apple Inc. (but he no longer owns them) to tap into the growth potential of the company’s smartphone. One of his current tech stocks is Sequans Communications, the first company to bring single mode LTE chips to market. “These chips are inexpensive … and are the last obstacle in making the true Internet of Things a reality,” Mr. Milne believes.

Best move

It was buying shares in wireless-technology company InterDigital Inc. during the dot-com bubble, paying $18 per share in December, 1999, and selling two weeks later in the mid $60s.

Worst move

“Listening to analysts and selling Netflix in 2012 at $10.50 a share [split adjusted].”

Advice

“Sell call options on your dividend stocks to boost income.”

Want to be in Me and My Money? Contact Larry MacDonald at mccolumn@yahoo.com or his website

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