2025 Investment Strategy Guide: A Comprehensive Guide from Trading Systems to Asset Allocation (Part 1)

2024/12/28

Dec 28, 2024

∙ Paid

Introduction:

As 2025 approaches, it's a brand new year. If you haven't established "your own" trading system or any asset portfolio allocation in the past, or if you sometimes make money and sometimes lose money in US stocks, and your investment method isn't consistently helping you generate profits, this article will provide methods for establishing your own trading system and asset portfolio allocation for 2025, along with examples and considerations.

Content:

Part One: The First Step in Establishing a Trading System and Asset Portfolio: Setting Annual Profit Goals

The trading system's suggestions are very important. For us investors, making big money and getting rich overnight is the best scenario, but behind overnight wealth is the need to spot accurately and bet a large portion of your assets on a particular target, which then moves in your expected direction. This situation is often heard in investment fairy tales, but not everyone will become that lucky prince or princess, and you need to have a considerable amount of money to start with. If your initial capital is small, even if you experience a 200% surge, your assets might not even amount to a fraction of what wealthy people have. The ideal is beautiful, but reality is cruel. However, the crueler the reality, the more it can help us find a winning method.

We settle for second best, and the logic of how this world operates is: most people's assets are distributed in a bell curve, meaning those at the extremes are fewer, and most people are in the middle or moderately well-off class. You and I are probably in the moderately well-off class (defining wealthy people is subjective, but I consider personal assets of over 100 million USD as wealthy). Since it's a bell curve distribution, it means you weren't born lucky into a wealthy family, nor did you become successful by luck, otherwise you'd be at the level of Chairman Huang or CEO Ma.

If you accept that your luck is basically in the middle 68% of the bell curve distribution, you should accept that you can't rely on luck to get rich overnight in this life. You might question, if not "overnight," couldn't I eventually become wealthy over a longer period? The answer is correct - as long as you use the right method, you have a secret weapon called: Time. Time is the fairest thing in this universe on Earth. Everyone, including the most powerful Trump or the world's richest CEO Ma, has the same 24 hours in a day, no more, no less. But how can you achieve or get closer to their level of wealth? (Or Warren Buffett's level?) That might require investment beyond your active income. If the investment method isn't correct, you might move further away from your goal.

Speaking of "goals," many people's investment goal is simply to "make big money." Some might ask: can these three words be quantified? What's the definition of "making big money"? It might be different for everyone, so how can we quantify more precise numbers based on our financial background? For instance, some people might have better financial backgrounds from birth, and they might consider making 10 million USD a year as making big money, while others might think making 1 million a year qualifies as making big money. So can you first think about defining "making big money" in "numbers"?

Before defining, please first examine how much money you have to invest in the new year (2025)? We need to take this step by step, practically establishing your own trading system and asset portfolio.

Let's take an example: after your examination, you've decided you want to make 1 million USD in 2025, but you're also investing 1 million USD in US stocks. This means your investment return would be 100% - do you think this goal is reasonable? Or is it too high? Unrealistic? Perhaps you might say: every time I pick stocks and use Options, my returns are over 100%, it's simple for me. Maybe so, but for the average person investing 1 million USD in US stocks, not always using Options, occasionally using leverage, occasionally using Options, but mostly investing in original stocks, a 100% return might be too much (inconsistent with your actual investment situation).

You might think, then let's reduce it by half. Let's think about if we reduce it by half, meaning by the end of 2025, assuming you invest 1 million in US stocks and make 500,000, is this 50% investment return possible? Is it reasonable? Does it match your actual investment situation?

Recognize Your Risk Profile Before Establishing a Trading System:

Let's think about the following questions using simple math: