This is the easy part

These are our girls, 6 and just-a-few-weeks-shy-of-4.

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Yes, they are unspeakably adorable. I know.

It struck me this weekend that, all things considered, this is the easy part. To date we’ve had no broken bones. No broken hearts. No Ds and Fs on report cards. No friendships ended in a fiery blaze. No fighting over boys or clothes or jewelry. No cars backed into garage doors. Sure, we have daily temper tantrums and tears and complaints about dinner and incessant bedtime struggles. But in the grand scheme of things, this has to be the easy part. We get to camp and go for bike rides and fly kites and tell stories and read books. They WANT to spend time together and do fun stuff with mom and dad. They love Sunday morning bagels and chasing lizards in the desert. And, we’re past diapers and naps and all of the exhausting parts of babyhood. We’re in a nice spot.

I can’t remember the last time I had a conversation with a client concerned about recent portfolio performance. And for good reason – this is the easy part. Diversified portfolios of all stripes are having a nice stretch. Whether you’re 35 and super aggressive or 60 and dialing things back, it’s hard not to be happy, or at least satisfied, right now.

Year to date nearly every major asset class is up; some equity classes are up double figures. Most are building on top of a really wonderful 2016 return. Here’s a quick rundown:

Index YTD Return 2016 Return
S&P 500 7.16% 11.96%
Russell 2000 3.59% 21.31%
MSCI EAFE 9.97% 1.00%
MSCI Emerging Markets 13.42% 11.60%
Morningstar US Real Estate 2.52% 8.02%

And bonds are still holding their own. The Great Big Scary Bond Bear Market™ we’ve been expecting since 2008 is apparently still hiding out somewhere, as the Barclay’s Aggregate Bond benchmark is up 1.59% year to date and gained 2.65% in 2016.

To be sure, we’ve had some frights along the way. Brexit and a unexpected US election outcome last year weren’t the “certainty” the market allegedly loves. But I feel pretty confident saying it’s been easy going. So what do we do with this information?

  1. Acknowledge it. Practice some mindfulness about your portfolio. Just reflect on the general lack of anxiety you’ve felt about your investments over the last 18 months or so.  It’s been nice, no?
  2. Despite headlines and your memory, this is what the market does over time. It goes up more than it goes down. Perhaps we’ve had less volatility along the way in the last year or so, but most years end green, not red. So while we won’t expect things to always be so rosy, this isn’t an abnormality.
  3. Prepare yourself for when these occasional market tantrums and teary eyes turn into door-slamming, hate-proclaiming, top-of-your-lungs screaming real life bear markets. They’ll be here, and you’ll wonder what happened. There’s no avoiding those phases, and the more you recognize that and plan for it now, the less hair-tearing you’ll put yourself through.

Successful long-run investing is a mental game more than anything else. While you need a sensible portfolio, most of your success is going to come down to your ability to get perspective on the current moment in market history, good or bad, and have a plan for wherever you find yourself.

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