I study optimal monetary policy and capital controls in an open economy New Keynesian model with endogenous portfolio choice. I develop an approximation method to characterize the solution sharply. The optimal policy balances two goals: (i) stabilizing output and inflation and (ii) enhancing the insurance properties of home-currency assets. The relative importance of these goals depends on the international portfolio. When the portfolio is optimally chosen, its exposure to home-currency fluctuations increases as the need for insurance grows, further amplifying the weight on insurance. This effect is significant. In a calibrated model for Canada, if the portfolio were held at its calibrated value rather than optimally chosen, the weight on insurance would be about five times smaller. Despite aggregate-demand externalities and incomplete markets, implementing the optimal portfolio does not require differential capital controls across asset classes.