Greg Aziz holds a degree in economics and has been the CEO of “SumZero Ltd.” since 1994. One of the biggest pieces of advice that he could offer anyone looking to maximize their money would be portfolio optimization. You may ask “What is portfolio optimization?” This article will define it and give a practical example.


Portfolio Optimization: Standard Financial Procedure

The goal is to finish a transaction that leaves you holding the best portfolio under specific conditions. For example, you might be tracking a specific portfolio, the “objective function,” but you need to keep 15% in equities and no more than 5% in liquid assets, your “conditions.” According to Greg Aziz, things can get more intriguing with multiple, competing goals; selling an appreciated asset could improve tracking but also raise your taxes.

Business Leader Greg Aziz

Simplifying the Concept

Greg Aziz applies an exercise for everyone. He asks you to imagine that it’s lunch time. You have several decisions to make: taste, price, nutritional metrics, caloric metrics, and heartiness. When you have several different variables, you can construct rules to inform the best choice (Abcmoney).

In this example, you might only consider the lowest price and calories. But a meal is not a stock or bond; you are only buying one meal, not a fraction of one. Under these conditions, you rule that $15 and 700 calories are your thresholds, Greg Aziz adds. While a good start, this approach has issues; imagine comparing a $14.99, 699-calorie meal to a $1, 701-calorie meal. How do you decide when both meals fall within your window? When one metric is near-identical, assess the others.