One way to understand the difference between “speculators” and “investors” in the markets is to consider a Las Vegas casino. In the casino, there are basically two kinds of people: the gamblers and the casino owners.
The gamblers are constantly betting on the next throw of the dice, the next turn of the cards, the next spin of the roulette wheel. Their focus is on right now and the immediate present.
The casino owners aren’t generally concerned with the next throw of the dice. They’re concerned with “fundamental” truth that, statistically, the casino has a 1.4% statistical advantage in the game of craps. That means that, in the long run, out of every 100,000 throws of the dice, the casino will win 51,400 throws and the gamblers will win 48,600 throws.
Yes, there’ll be the occasional sailor who makes seven consecutive passes and wins a small fortune—but, long-term, the casino’s seemingly small 1.4% advantage is enough to guarantee that, long-term, the casino owners will become fabulously wealthy and—if the gamblers play long enough, they’ll lose every cent they’ve got.