Dubai: Let's start with wishing all Gulf News readers a prosperous New Year!

It's a wish that will have some successes and some failures. A numbers game. And that will be the first point: the end-of-the-year is a numbers game. So, you lost 6 per cent on the FTSE or 15 per cent on the DAX, do you sell because its the January 1?

Of course not. Year end dates make good interim assessment points mainly because the workers are on holiday, we breathe in, look at how much we have today, and then assess the year's holiday options.

So January 1: is not a good time to make changes because the "as at December 31, 2011" was not as good as the January 1, 2010 numbers. Tottenham Hotspurs will not sell Luka Modric because they are only third; India will not drop Sachin (no way), and Ponting might be on the edge, but not because of a poor 2010 in isolation.

For the non-sporting: the December 31 date is only important if it was the maturity date of an investment. At that point, the maturity point, the previous 12 months will have mattered. If you lost 15 per cent on the DAX on a portfolio of 100 per cent German equities, oops, something went wrong. A 12-month loss is consolidated.

Win the war

Investors need to see their investments like football seasons, for cricketers change to the IPL, for environmentalists change to the weather. Win the War not the battle. Increased market volatility means that understanding our seasons is increasingly more important.

Thinking in seasons means that winter doesn't end on December 31, or January 30. It ends when the temperature rises. A specific benchmark is achieved, and we change our clothes as a result.

In this thinking, our clothes become our Asset Allocation. We have the ability to change our assets in the same way we change our clothing style: no more jumpers (temperatures rise); buy more equities (equity markets rising).

So, to the really important bit: putting our seasonal thinking into asset allocation strategy for optimum performance means planning to run your campaign over a number of seasons.

Each season will need a benchmark. The season ends when the benchmark is achieved. The only season that enjoys an exact date is the maturity date.

Between seasons we should worry: are we dressed appropriately? Is our asset allocation going to get us to the benchmark? For regular investors (saving monthly), those seasons could be interpreted as: Season One: save in highly volatile markets. Enjoying the fact that the DAX is down 15 per cent.

The key question: when is the end of that season? You might have had to move it because of Lehman's and maybe again because of poor markets. But, the most important question: what is the benchmark for season change?

Old money, new money

The second season needs to acknowledge that we have "old money" (previous years of saving); and "new money" (future savings). Old Money should hold profits and should be wrapped in different clothes, sorry assets, in order to protect that capital.

Then we have "Season Three". Our maturity date is approaching. We now have to think as if we are managing capital. We are older and wiser investors. We wear our protective clothing more sensibly. That maturity date looms. Now the date matters.

The writer is Chairman of Mondial Financial Partners.

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