Does selling investments and buying others before the end of the Hawl (a year) exempt one from Zakat, or is Zakat due only on the profit?

The zakat on trade goods is due on their market value when a year has passed, not on the goods themselves. If a merchant sells his goods before the year is complete and buys other goods, the zakat does not lapse. Rather, the year is calculated from the time of acquiring the original capital, and the goods are valued at their market price when the year is complete. Both the principal and the profit are then subject to zakat. If trade goods are purchased with money below the nisab (minimum threshold), the year begins when the nisab is reached. The profit is added to the principal in calculating zakat according to the Malikis and Hanbalis, and this is also a view among the Shafi'is and Abu Yusuf.

As for attempting to evade zakat by purchasing fixed assets (like land) before the year is complete, this nullifies the zakat if it occurs at the beginning of the year. However, if it occurs after the year is complete, zakat becomes obligatory. If it occurs close to the end of the year, there is a difference of opinion. You must advise your friend that zakat is obligatory and that attempting to evade it is forbidden, and that he should pay what is due from him, because charity does not diminish wealth but rather increases it.