What makes an investment profitable?Do profitable investments create wealth?Why/why not? Do all create wealth?

There are at least two different ways in which an investment can be profitable. 1. Someone is willing to pay you more for the asset than you paid. 2. The asset generates a stream of income that generates profit for you.

Option 2 creates wealth. Option 1. does not. Why? Option 2 creates wealth because the investment generates income. Option 1 in itself does not create wealth. Or falls more or less under the bigger fool hypothesis. For example you might have bought a Van Gogh for $1,000,000 but sold it for $10,000,000. No wealth was actually created, just transferred.

The idea of an investment is that it should create wealth and the profit is the share of that new wealth attributable to the person supplying the capital. Note that the stream of income need not be paid out; it can be reinvested in the company to make the company more valuable and the investor makes money when he sells the more valuable stock.

Of course not all investments succeed. But it is the idea of possible wealth creation that distinguishes investing from gambling. In gambling, no wealth is being created; it's just being moved from the losers to the winners.

Note: the "greater fool theory" refers to when someone buys something foolishly ignoring the facts and simply hopes to profit by selling to a greater fool. It has nothing to do with making money by selling an appreciated asset. There is a huge difference between an increase in value of a company and the increase in price of a painting.