Every investor has that moment of clarity when they realize they've been leaving money on the table. For me, it came while watching clients hold onto great companies through the inevitable rollercoaster of market volatility, steadfastly following the age-old advice to "just ignore the noise." But what if that noise, that very volatility we're told to fear, was actually valuable?
At Purpose, we care deeply about helping investors build more resilient portfolios and achieve optimal outcomes. This isn't just investment management jargon; it's a fundamental belief that drives everything we do. We believe there's real value in owning high-quality stocks when you have a genuine thesis about their long-term growth potential. The challenge isn't identifying great companies – it's optimizing how you own them.
Think about it this way: when you buy Apple at $150, you're essentially saying, "I believe this company will be worth significantly more in five years, and I'm willing to weather the daily, weekly, and even annual volatility to capture that upside." Traditional wisdom tells us to look away from the volatility, to treat those price swings as background noise – a necessary evil on the path to long-term wealth creation.
But here's what conventional wisdom gets wrong: volatility isn't just noise to be ignored; it's a risk premium that can help investors enhance portfolio returns. We have often seen that options are often overpriced relative to the actual volatility that occurs, creating what's known as the volatility risk premium. Smart investors have been quietly harvesting this premium for decades.
The math is compelling. If you historically owned $100 of a stock, you should consider writing options on $10-40 of that position. This allows you to capture the long-term value appreciation of the stock while generating additional returns from the volatility during your holding period. Covered call writing is a time-tested approach that can add income, dampen volatility, and diversify both equity and fixed income core strategies.
The concept sounds simple, but execution is where most investors stumble. Options require large trading positions to be cost-effective, carry high transaction costs for retail investors, and demand active management that can be incredibly time-consuming. It's a great idea that most people simply can't implement efficiently on their own.
This is precisely why we innovated Yield Shares. Our goal was elegant in its simplicity: create a series of ETFs for the stocks investors already love and hold, while systematically writing options on a meaningful portion of the portfolio – up to 50% in our case. We wanted to give every investor access to institutional-quality option execution and active option management, all packaged in an easy-to-use ETF wrapper.
We launched with U.S. stocks first, focusing on the companies that dominated portfolios from coast to coast. Now, I'm excited to share that we're bringing this innovation home with Yield Shares for Canada's most beloved stocks, including each of the big banks, Shopify, CNQ, and Enbridge, along with others.
Our Yield Shares ETFs benefit from institutional option writing execution, active management across multiple option strikes and expiry dates, and professional oversight—all elements that would be nearly impossible for individual investors to replicate effectively. These aren't just tools; they're solutions designed for building more resilient portfolios and generating better long-term risk-adjusted returns.
Here's how it works in practice: if you own $100 of Apple stock because you believe in the company's long-term prospects, you can take $70 and invest directly in AAPL shares, then allocate the remaining $30 to our Apple (AAPL) Yield Shares Purpose ETF (CBOE Canada: APLY). Your Apple exposure now captures the long-term upside potential while aiming to generate higher current income and managing risk during the inevitable ups and downs of Apple's stock price.
This isn't about timing the market or making complex bets. It's about recognizing that the volatility inherent in every stock position represents untapped value. While others see volatility as something to endure, we see it as something to harvest.
We fundamentally believe this represents an effective way to own stocks for the long term. It's not about choosing between growth and income, or between risk and return. It's about structuring your investments to capture both the long-term appreciation you're seeking and the short-term premiums that volatility provides along the way.
At Purpose, we're not just building products; we're reimagining how investors can achieve better outcomes. Because in a world of endless market noise, ignoring volatility isn't the answer; a smarter approach is to make it work for you.
— Som Seif is CEO and founder of Purpose Investments
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