Mastering Diversification: Unlocking Long-Term Profitability through Strategic Portfolio Investment

Hello everyone!  

I’m delighted to meet all of you here at Diamond Ridge Financial Academy as we delve into the exciting investment opportunities emerging from the tech revolution. I hope my insights will prove valuable, and I wish you all a wonderful evening ahead.

Last night, we dived deep into the core ideas behind long-term and short-term investing. Short-term investing focuses on quickly capturing market fluctuations and earning returns through high-frequency trading. It’s ideal for investors who are comfortable with higher risks and value flexibility in their capital. On the other hand, long-term investing emphasizes in-depth research on macroeconomics, industry trends and a company’s fundamentals, aiming to build wealth over time through the power of compounding. This approach suits more conservative investors.

No matter which strategy you choose, the key is to adjust based on your risk tolerance, market conditions and investment goals, rather than sticking to just one method. Short-term trading provides cash flow and flexibility while long-term investing acts as the “safety net” in your portfolio, laying the groundwork for steady growth. Combining the two can help achieve more stable and consistent returns while keeping risks manageable.

Choosing and sticking to an investment strategy requires not just technical skills and analysis but also discipline and perseverance. Truly understanding the essence of your strategy, recognizing your own position and setting clear long-term goals are what will keep you ahead in the market.

Looking back at 2024, the AI industry saw rapid growth, driving advancements in fields like quantum technology and genetic engineering. With the continuous evolution of AI, these sectors are set to achieve significant breakthroughs this year. Now, at the start of 2025, we’re embarking on a new chapter in our investment journey. I hope each of you finds a strategy that suits you and reaches your financial goals.

Tonight, we’ll continue exploring investment strategies to help you shape your own investment plans. Before we dive into the session, let’s take a quick look at today’s stock market performance.

Both the UK and US stock markets fell today, influenced by economic data, reflecting a cautious global market sentiment. In the London stock market, the FTSE 100 index closed down 71 points at 8,248, matching earlier predictions. Stocks like Entain PLC, Schroders PLC and J Sainsbury PLC led the declines. Sainsbury's shares fell despite reporting strong Christmas sales in the morning, as analysts pointed out that its price-cutting strategy could hurt future profits, causing the drop.

In contrast, InterContinental Hotels Group, along with energy giants BP and Shell, bucked the trend and rose, driven by higher oil prices and expectations of US sanctions on Russian oil. However, gains in energy stocks were not enough to offset losses in other sectors and the FTSE 100 ultimately closed in the red. On a weekly basis, though, the index still posted a slight gain.

US stocks market saw a sharp decline right after opening, mainly due to the stronger than expected Non-Farm Payroll (NFP) data released earlier in the day. The data showed that 256K jobs were added in Dec and the unemployment rate unexpectedly dropped to 4.1%. This significantly dampened market hopes for future Fed rate cuts.  

While strong employment data is usually seen as a sign of a robust economy, it also suggests the Fed may need to maintain higher interest rates for longer to control inflation, putting pressure on the stock market. The Nasdaq, S&P 500 and Dow Jones all posted steep declines, reflecting investor concerns about Fed policy tightening.

Today’s declines in both the UK and US stock markets were closely tied to macroeconomic data and market expectations. Strong US jobs data reduced hopes for rate cuts, leading to sharp losses in US stocks, through global market linkage, also negatively affected the UK stock market. Within the UK stock market, the weakness in the retail sector and concerns about future economic growth added to the market's decline. Additionally, the continued weakness of the pound and rising UK bond yields further increased market uncertainty, negatively impacting investor sentiment. The future trend will largely depend on the Federal Reserve's monetary policy direction and the UK government's fiscal policies and economic growth outlook.

The first and most critical step in investing is choosing the right direction. If the direction is wrong, even the most sophisticated tactics will be in vain. Take the energy sector as an example. This is a highly discussed field right now. Traditional energy sources like oil and natural gas, while still crucial to the global economy, face constraints in their long-term outlook due to environmental policies and the rise of new energy sources. If one chooses traditional energy or real estate assets, it’s difficult to achieve profitability in long-term investments. Especially in the real estate market, with prices currently running at high levels, there is a significant risk of a sharp decline.

In contrast, emerging industries like new energy, including solar, wind and energy storage technologies, are showing tremendous growth potential and attracting the attention of countless long-term investors. Many students have followed investments in stocks like Tesla and have achieved continuous returns over the past few years.

Of course, traditional energy stocks also provide excellent leverage opportunities for traders due to frequent geopolitical and supply-demand fluctuations. For example, through precise operations with West Texas Intermediate (WTI) contracts over the past two weeks, traders have achieved returns of over 80% in a short period. This also demonstrates that investment direction needs to be chosen based on time dimensions and strategy goals.

Once the direction is chosen, how to combine personal style with market opportunities is key to determining returns. For investors who prefer long-term steady growth, tech stocks and digital assets are undoubtedly among the best choices. These assets not only have high growth potential but also allow for compound returns through long-term holding. For example, the company’s VIP clients under the guidance of Chief Analyst Mr. Hanover, bought Nvidia stock at the beginning of 2023 and kept adding to their position, earning over 800% returns in two years.  

For traders who enjoy short-term volatility opportunities, contract trading, day trading and other high-frequency strategies are more attractive. Crypto is a typical short-term trading target, as its price is highly sensitive to economic data and market sentiment. For example, on the day the Non-Farm Payroll data was released, key breakout points were captured through technical analysis, achieving a 30% profit in just one hour. This fast-paced trading style undoubtedly fascinates many but it requires strong execution and discipline.

Of course, true conservative investors never stick to just one strategy but instead use a combination of investments to balance maximizing returns and minimizing risks. The core of a diversified investment strategy is properly allocating different types of assets to effectively spread risk and optimize returns. A classic example is combining tech stocks with safe-haven assets (like gold and bonds). When tech stocks drop due to market shocks, gold usually performs well, helping offset some of the losses. This complementary allocation makes the portfolio more flexible and resilient to risks.

In addition, the combination of long-term investing and short-term trading further enhances the advantages of a diversified strategy. Many investors adopt a "long-term holding + short-term trading" approach, such as holding high-quality assets in the new energy and tech sectors for the long term to capture their ongoing growth potential. At the same time, they take advantage of short-term price movements in oil or forex markets for arbitrage opportunities. Even when the market environment changes drastically, this dynamic combination helps investors maintain steady growth in overall returns.

The use of information asymmetry is an advantage that cannot be ignored in portfolio investment. Market information is not completely symmetric, while the price volatility and time differences between different assets provide investors with significant profit opportunities. For example, at the beginning of 2024, Nvidia released an upgraded AI chip, which led to a rapid increase in stock prices, with a 90% gain in three months. At the same time, BTC, which has a tech characteristic, also saw a sharp rise of over 80% in the following month. By capturing this correlation, investors can create a connected portfolio between tech stocks and crypto, significantly boosting returns.

In addition, the valuation differences of the AI industry in international markets also provide investors with opportunities for cross-market arbitrage. For example, by adjusting asset allocation during different phases of trading sessions in the UK and the US or taking advantage of market rebounds after adjustments, investors can achieve more stable profits. This keen grasp of information asymmetry not only increases the success rate of investments but also strengthens the practical value of portfolio investment.

Cross-asset risk hedging is another important advantage of portfolio investment. For example, using the inverse correlation between stocks and exchange rates for risk management can help investors maintain stability in returns during market fluctuations. Currency depreciation typically enhances the profitability of export-oriented companies, as their products become more competitively priced in the international market. Conversely, currency appreciation can negatively impact export companies.

Recently, the depreciation of the British pound has provided important support for the rebound of the UK stock market, which is a typical case. This week, while US stocks dropped sharply, the FTSE 100 index rose against the trend, mainly due to the depreciation of the British pound, which boosted the competitiveness of export companies. This phenomenon inspires investors to build a diversified portfolio, with part invested in stocks of export-oriented companies and another part allocated to financial instruments related to the country’s currency (such as forex futures or currency swaps) to achieve more stable profit results.

The complexity and uncertainty of the market determine that a single investment method is hard to handle various environments. The portfolio investment strategy, through diversified allocation across asset classes, investment directions and time dimensions, offers investors greater flexibility and risk resistance. In practice, portfolio investment is not only a tool for achieving stable profits, but also an art that allows wealth to grow with greater ease and resilience. The core behind this strategy is mastering a big-picture mindset and the ability to make dynamic adjustments, perfectly combining risk diversification with optimized returns.

For every investor aiming for long-term stable profits, the portfolio investment strategy is not simply asset stacking, but a path to wealth goals achieved through scientific planning. It helps us find a balance point amidst market uncertainty, ensuring that the investment portfolio remains resilient and promising in changing environments. The long-term stable investment strategy is one of the key concepts I’ve learned over the past two years from following Chief Analyst Mr. Charles Hanover. The above content is just a brief share of the knowledge I’ve gained and I hope everyone can find inspiration in it to discover their own investment strategy, laying a solid foundation for the investment journey in 2025.

This Sunday, Mr. Hanover will lead us to look at the entire investment market from a "God's-eye" view, helping us capture every potential investment opportunity more clearly. He will not only deeply analyze the root causes of current global economic conflicts but also outline the key trends in future economic development, helping us better face the challenges of the market and lay out strategies for long-term profits using the simplest methods.  

Looking ahead to 2025, under the guidance of Chief Analyst Mr. Hanover and with the precise assistance of the quantitative trading system tools, we will not only be able to scientifically grasp market fluctuations but also have the ability to achieve leap-forward growth in complex investment environments. Let’s work together, achieve mutual benefits, create our own investment brilliance and welcome the blooming of wealth!

Through tonight's sharing, please think about:  

1. What are the advantages of portfolio investment? What are the different investment strategies?  

2. Based on your experience and the knowledge you’ve learned, which portfolio investment strategy do you prefer?