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When you score big on a small-cap stock, it's easy to feel like a stock market wizard.

In the world of small-caps, a relatively small investment of $10k-$50k can sometimes yield millions. It happens more often than you think.

And this is where it all starts to crumble.

Did you know that 70% of lottery winners go bankrupt within a few years? 

While not as extreme, the same thing happens with small-cap investors.

A big win inflates the ego. Investors will buy a few nice things, maybe a new car or a new house, and take their wife on a few trips. All good, no issues there - celebrate your wins, life is too short.

The problem arises when they inevitably get bored.

They realize that being rich with nothing to do is boring, so they decide to get back into the game with their new perspective on money.

Problem is the new perspective is not what got them there in the first place.

They begin to get cocky, making decisions based on the idea that they know best.

They did it once, they can do it again, and if they lose on a few, that’s fine - they can keep trying.

If you have 100 darts, at least one will hit the bullseye, right?

But with lifestyle changes and a few bad investments, 100 darts quickly goes to 50, then 25 and soon you’re down to your last few.

Take the '90s, for instance. Stocks were skyrocketing, and many investors thought they had the all the answers.

Seriously, everyone thought they were Warren Buffet.

But when the tide turned, it became clear that the rising market had lifted all boats, not just the skillfully navigated ones.

Consider John McAfee's story, too. He made his fortune with McAfee antivirus software but lost his way with risky bets with cryptocurrency, biotech and more.

His social media presence grew large through his wild antics, but ultimately led to his death in a prison cell in 2021.

Although his girlfriend claims his death was faked. 

Most successes come from hard work, good timing, or plain luck—not pure genius.

Even the smartest investors need a bit of luck.

What can you do?

To avoid falling into the overconfidence trap, consider these strategies:

• Always be open to new information and perspectives, you’re not always right.

• Spread your investments to mitigate risk. Sure, make a few bets but have a nest egg to rely on.

• Seek Advice and don't shy away from getting insights from others, there’s a lot of smart people out there.

• Avoid the lure of quick, risky wins and focus on long-term goals.

If you win big, it’s a good problem to have. But still a problem.

You’re probably not a genius, don’t pretend to be.

👋 Colton, Stock Monster.

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This newsletter is for informational purposes only and should not be considered financial advice. Always conduct your own research before making any investment decisions. We have not been compensated in any way for this pick or content; we genuinely just like it. Assume that contributors to articles own or have interest in stocks they talk about, therefore may be bias.