@article {Dym9, author = {Steven Dym}, title = {Recognizing Investor {\textquotedblleft}Comfort{\textquotedblright} Assets in Portfolio Optimization}, volume = {15}, number = {4}, pages = {9--16}, year = {2013}, doi = {10.3905/jwm.2013.15.4.009}, publisher = {Institutional Investor Journals Umbrella}, abstract = {The author observes that not all asset decisions fit neatly into the traditional risk{\textendash}return paradigm of portfolio selection. For example, investors may wish to include in their portfolios a minimum percentage representation, or an absolute dollar amount, of socially conscious firms. A simple solution involves specifying a minimum amount of the asset and applying nonlinear optimization techniques to the entire portfolio. This strategy, however, does not recognize the special nature of the investor{\textquoteright}s preference and how it expresses itself in the portfolio. The author presents an alternative technique, illustrated through the use of gold as a comfort asset, as applied to a portfolio of foreign currency{\textendash}denominated securities. There, the investor chooses the optimal asset allocation (including currency hedging), recognizing gold as both a currency diversifier and {\textquotedblleft}desired asset,{\textquotedblright} independent of its expected return, risk, and correlation with other assets.TOPICS: Portfolio construction, commodities, currency}, issn = {1534-7524}, URL = {https://jwm.pm-research.com/content/15/4/9}, eprint = {https://jwm.pm-research.com/content/15/4/9.full.pdf}, journal = {The Journal of Wealth Management} }