If portfolio performance was the only thing that shaped investor confidence, many people would be feeling more comfortable than they are today.

Over the past year, many diversified portfolios have delivered returns towards the upper end of what we would normally expect. Over three years, returns have also looked strong in many parts of the market. Yet uncertainty still feels very present. Headlines remain unsettling and many investors are still wondering what comes next.

At first glance, that might seem strange. If portfolios have been doing well, why does uncertainty still feel so present?

Investment returns do not exist in isolation. We experience them alongside everything else happening around us. Trade tensions, inflation, changing interest rates, government debt, geopolitical conflict, political uncertainty, and a constant stream of commentary about what might happen next all compete for our attention. Even when markets are performing well, the broader environment can still feel uncertain.

That reminded me of another period when concerns about the future captured the world’s attention. The date was 31 December 1999.

As New Zealanders, we occupied an unusual position that night. We were among the first developed countries in the world to enter the new millennium, which meant much of the world was watching to see what would happen. If major systems were going to fail, countries in our part of the world would provide the first clues.

As the world prepared to welcome the year 2000, there was a genuine sense of uncertainty about what might happen when the clock struck midnight. Banks, utilities, airlines, telecommunications networks, hospitals, governments and financial markets had all spent years preparing for the possibility that critical systems could fail.

The concern became known as Y2K, or the Millennium Bug. Many computer systems stored years using only two digits, creating fears that the transition from 1999 to 2000 could trigger widespread errors.

Looking back, it is tempting to laugh at the idea. The planes kept flying. The lights stayed on. Bank accounts remained intact. Society carried on much as it had the day before.

But that does not mean the concern was irrational. A huge amount of effort had gone into preventing those problems from occurring. Research firm Gartner estimated that governments and businesses spent somewhere between US$300 billion and US$600 billion preparing for Y2K.

As reports emerged from New Zealand that banking systems and other critical services were functioning normally, confidence gradually grew that the worst fears might not eventuate.

What strikes me is that preparation often looks unnecessary when it works. We see this in many areas of life. Insurance, preventative healthcare and maintenance all tend to look unnecessary when they are working as intended.

A diversified portfolio can seem unremarkable when markets are calm. Rebalancing can feel unnecessary when one part of the market is performing exceptionally well. Holding defensive assets can feel frustrating when growth assets are surging ahead. Yet these disciplines are often doing exactly what they were designed to do.

What makes the Y2K story even more interesting is that it was not the source of the major market declines that followed.

While some markets struggled, many asset classes held up better than people might have expected through 2000 and even 2001.

By 2002, many global share markets had experienced significant declines. Yet the causes had little to do with Y2K. Instead, investors found themselves dealing with the aftermath of the technology bubble, a weakening economy following the 2001 recession, and a series of high profile corporate scandals that damaged investor confidence. Companies such as Enron and WorldCom became symbols of a broader loss of trust in corporate reporting and governance.

Investors were right that uncertainty existed. They were right that risks were present. But the risk that received the most attention was not the one that ultimately caused the greatest market pain.

Investors face the same challenge today. There is never a shortage of things to worry about. What we cannot know is which concerns will ultimately matter most. That is why I have always believed the purpose of financial advice is not to predict the future. It is to help people make wise decisions despite not knowing the future.

Markets do not reward us for reacting to every concern that captures our attention. More often, they reward patience, discipline, diversification and the ability to stay focused on a well-considered plan.

Good stewardship matters, but so does humility. We can prepare thoughtfully for a range of outcomes, but we cannot predict the future with certainty.

For me, that reinforces two simple ideas:

• Plan carefully.
• Hold those plans with open hands.

Y2K reminds us that uncertainty is inevitable, but the future rarely unfolds exactly as we expect. Investors in 1999 were right that risks existed. What they could not know was which risks would ultimately matter most.

The night the world held its breath ultimately turned out to be far less dramatic than many feared. Not because there was nothing to worry about, but because a great deal of preparation had been done beforehand.

To me, that is exactly what good financial planning looks like. Do the work you can do today, recognise what you cannot control tomorrow, and make the wisest decisions you can with the information available.