Question: Why are so many people surprised when they lose money investing?

Answer: Because they don’t know what “investing” means!
 
Definition: Invest v. (often followed by in) 1a. apply or use (money) esp. for profit b. (followed by in) put money for profit into (stocks etc.). 2. (often followed by in) devote (time etc.) to an enterprise. 3. (followed by in) colloquial buy (something useful)…. [The Oxford Dictionary of Current English, Oxford University Press, 1993]
 
No wonder! According to this definition just about anything qualifies as an “investment”. Since every investor expects to earn a profit on his investment, and since just about anything qualifies as an investment, we should be able to “invest” freely and loosely and reap the just rewards. Certainly the stock market during the latter part of the 90’s confirmed that. So what went wrong in the past few years? And how come “investments” in sectors such as mining turned out so bad?
 
I think that the above definition of “investing” is pathetic. It doesn’t even illustrate a remote sense of what investing is about. The dictionary is not to blame; it only reflects how people use the word and therein lies the problem. The term “investing” is used without any regard for its meaning.
 
I propose a new definition. It is not entirely my own since it is based on the work of Benjamin Graham and David Dodd.
 
Definition: Invest v. (often followed by in) the purchase of an asset, real or otherwise, where there is a quantifiable expected return, offset against acceptable risk. The probability of making such return should be very high and is primarily the essence of the risk taken. The probability of substantial loss should be very small.
 
Definition: Speculate v. (often followed by in) the purchase of an asset, real or otherwise, where the return is not quantifiable and/or the risk is indeterminable. The probability of making a return is primarily the essence of the risk taken. The risk may also include the probability of losing all, or essentially all of, the money used to speculated with.
 
If these definitions were ingrained into investors’ minds and they furthermore applied these standards against potential investments, much sorrow and grief could be avoided. Many people would hopefully realize that what they think is “investing” is in reality nothing more than rank “speculation”.
 
In fact, true investments are very rare and difficult to come by. It takes considerable work to identify investments and separate them from speculations. Now, there is nothing wrong with speculating. As long as you know that you’re speculating and if you are willing to lose a substantial portion of your capital if the speculation doesn’t work out. Note however that part of speculating is the fact that there is substantial, and most often indeterminable risk involved with a high probability of loss.