Once investors have figured out the big picture, it is much easier to be successful.
But it is a lot harder to make money for those who get it wrong.
For example, investors probably lose money, even if they own shares of the best company in a fading industry.
But the odds of making money are a lot higher for those who invest in a booming industry, even if the company invested in is very average. And, of course, those who invest in an outstanding company in the same booming sector, have better odds of having it made.
Even the best horse-and-buggy company run by the savviest people was doomed to becoming a money-losing novelty when automobiles came around. Similarly, investing in land-line telephone companies was a terrible idea as cellular telecommunication took off.
More recently, Alibaba and Amazon have taken over retail, making life increasingly difficult for brick-and-mortar stores. Oil companies look to be in long-term decline as renewables take over.
And as self-driving cars emerge, car and auto insurance companies are either going to have to adapt or go the way of the horse and buggy.
Yes, it is possible to make money investing in industries that are on their way out.
Shareholders profited when cellular providers started buying out land-line phone providers. Oil will be a major energy source for decades, and self-driving cars might not catch on with the general car-buying public.
But to improve the odds of making money as an investor, get the theme right by looking at the big picture and determining which sectors and industries will grow. That is where the most profitable companies will be and where it will be easier to pick a winning stock.
Seeing the big picture is like asset allocation.
Asset allocation refers to the mix of stocks, bonds, cash and other assets in a portfolio. For those invested in the wrong asset such as bonds when stocks are doing well or the wrong region or country, say, Europe when Asia is booming, it is a lot harder to earn a good return.
For example, The Financial Times recently reported that investing in U.S. equities 10 years ago would have provided a buy-and-hold return just shy of 70%.
But those who invested in the rest of the world instead would have lost 8%, and those who only focused on Europe, would have been down 13%. Emerging markets did better than Europe over the same period, but they still would have only earned an investor 14% over 10 years.
Choosing between stocks or bonds also made a difference 10 years ago. Long-dated U.S. Treasuries have returned 8.4% on average over the past decade, almost a percentage point better than the S&P 500's 10-year return.
Again, that doesn't mean that investors can't make money investing in Europe or elsewhere. Plenty of investors have earned a good return by investing in Europe over the past decade.
Nimble traders can take advantage of markets moving up and down over the short term. Long-term investing is a myth, and over periods of 10 years or more stocks usually do better than bonds and carry more risk.
But getting the big picture right 10 years ago and investing in the U.S., especially bonds would have made it a lot easier to make money, without having to be a nimble trader or just lucky.
So what will be the biggest investment theme over the next 10 years? Where will even mediocre companies do well and investors find it easy to make a lot of money?
Opinions are divided, but infrastructure is definitely worth looking at.
Infrastructure covers everything from airports to bridges to highways to water pipes. It is what makes civilization and economic growth possible, and it is something that we often take for granted.
As shown below, infrastructure investment has been declining for decades. Investment in infrastructure as a percentage of gross domestic product has declined by about 30% since 1970 in advanced economies, but the need for infrastructure has only increased due to growing populations and economies.
How big is the need for infrastructure?
Between 2012 and 2030, $57 trillion will need to be invested in infrastructure just to keep up with economic growth, according to global investment manager AMP Capital, and based on a study by management consultant McKinsey.
In 2014, PricewaterhouseCoopers forecast that by 2025, annual infrastructure spending would need to grow from $4 trillion to $9 trillion by 2025 for all infrastructure sectors.
Those are enormous numbers. Investing in the infrastructure sector will be like running with a stiff tailwind, and choosing the right infrastructure company in which to invest could earn investors fantastic returns.
Kim Iskyan is the founder of Truewealth Publishing, an independent investment research company based in Singapore. Click here to sign up to receive the Truewealth Asian Investment Daily in your inbox every day, for free.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.