For those of us in Arizona, we all knew it was coming. The current heat wave Arizona is experiencing is, if not a disappointment, an early summer punch in the gut. Whenever I mention the heat, Katie likes to remind me how much I dislike the cold and asks if I would rather have months of snow instead. She knows what she is doing as obviously I do not want snow and cold, because amongst other things, it is hard to hit a golf ball under three feet of snow.

Fortunately, with the temperatures rising and the heat being here for the next few months, my family has access to a pool. This is not so much for Katie and me, but rather for Francis. Since he was six weeks old, we have had Francis in swim lessons. When we started swim lessons, Katie joked she wanted Francis to follow in my footsteps and be a swimmer and swim in college. This is obviously a long term goal, one which can change numerous times. For the first two years, the three of us would go to the swim school with more times than not, myself being the one getting into the pool with Francis. During these lessons, the teacher would add new skills while continuing to reinforce what was previously taught. Much to my happiness, over the past year I no longer need to get in the water as Francis and his friends interact with the teacher individually. These lessons have been great for Francis as he loves to swim and if he had his way, would spend hours a day swimming. His love for the water will certainly make this and future summers much more bearable.

While not seemingly connected there are many similarities between swim lessons and the wealth management we are providing and completing with you. For the first six months of Francis’ time in the pool, the teachers were trying to teach comfort. They wanted to him to not be afraid to be in the pool and ultimately wanted him to feel comfortable going under the water. This is very similar to the time we spent learning about your goals as well as trying to understand how you react to events and situations in your life. It is only after Francis was able to go underwater that we could even think about more advanced swimming. Once we learned more about you and your comfort in “going under water” we were able to start creating the framework of your advanced plan.

Throughout the entire time we have been attending swim lessons, the most important skill the school is teaching is safety in the water. When Francis first started swimming, this meant Francia could fall into the water and know how to roll over on his back and float. In wealth management, we call rolling over onto ones back, wealth protection. Protecting you and your family from known and unknown risks. Wealth enhancement is looking to mitigate the taxes you are paying and track your cash flow needs, just as the swim school is looking to teach Francis the skills so as he does not have to always reach for the wall or have someone swimming with him. Finally, even though I have not swam laps for years, we started Francis in swim lessons early because I wanted to transfer my love for the water hopefully to him. Wealth transfer is the transferring of your assets and values to future generations in the most efficient way possible. As you can see, swim lessons are very similar to wealth management. You consider the goals for each child, build an initial framework, and then refine as each lesson and year goes by.

During the swim lessons, the teachers have started to add various equipment to help Francis learn. The most recent addition were fins. Fins are being used to help him kick and provide more propulsion so as he can work more on his arms. In the world of wealth management, the fins are your portfolio. The fins, just as your portfolio, may not be needed or used all the time. Rather the fins will be used at various times for training and fun, just as your portfolio is used for needs and desires at various times. Your portfolio is designed around your personal goals and objectives over a specific period of time.

As measured by the S&P 500, the market gained approximately 3% this week. While I have been sending weekly emails with the results of the prior week, we need to make sure to not get too caught up in the week to week movements. If Katie and I tried to see Francis’ progress minute by minute during the swim lessons, we would have extreme highs and significant lows. This is not much different than looking at the day to day or week to week performance of the S&P 500. Rather we need to look at the entire picture over numerous years. The below chart, from MFS, shows the return of the S&P 500 over 1, 5, 10- and 20-year periods and the percentage of time the index ended up or down.

As one can see, the longer the time period the higher the percentage of up versus down years.

Have a good weekend and continue to stay safe and healthy.

Chris

Chris Zeches, CFP®
Managing Partner