PT - JOURNAL ARTICLE AU - Steven Dym TI - Recognizing Investor “Comfort” Assets in Portfolio Optimization AID - 10.3905/jwm.2013.15.4.009 DP - 2013 Jan 31 TA - The Journal of Wealth Management PG - 9--16 VI - 15 IP - 4 4099 - https://pm-research.com/content/15/4/9.short 4100 - https://pm-research.com/content/15/4/9.full AB - The author observes that not all asset decisions fit neatly into the traditional risk–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’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–denominated securities. There, the investor chooses the optimal asset allocation (including currency hedging), recognizing gold as both a currency diversifier and “desired asset,” independent of its expected return, risk, and correlation with other assets.TOPICS: Portfolio construction, commodities, currency