Making money won't always be this easy: A letter to investors who profited in a bull market.

Success often leads to arrogance (like Graham’s case) and lays the groundwork for future failure. Investors should avoid being swept away by bull market optimism, as the market ultimately corrects overconfidence. This article was sourced from A Wealth of Common Sense by BEN CARLSON and translated and published by BlockTempo.

(For context: CryptoQuant Analyst: $101,000 is Bitcoin’s last line of defense—if breached, the bull market structure collapses)
(Additional background: Why does Bitcoin repeatedly hit new highs this bull market while altcoins consistently hit new lows?)

Bull markets can create an inflated sense of expertise, while bear markets may undermine investor confidence.

Rising markets may foster a sense of omniscience, whereas declining markets often lead to uncertainty. This is a common psychological response.

Benjamin Graham launched his investment partnership during the Roaring 20s with his clients and $400,000 of his own capital. In just three years, he grew that $400,000 into $2.5 million. Much of this was his own money, accumulated from savings and management fees.

This extraordinary performance coincided with the stock market’s dramatic boom.

Yet, like most, Graham didn’t foresee the Great Depression. He tried to catch the bottom multiple times, only to fail disastrously.

Michael describes these events in Big Mistakes:

In 1930, Graham thought the worst was over and invested all available capital and increased his position. He used leverage to chase returns he believed would be substantial. But the worst wasn’t over. When the Dow crashed, Graham had his worst year, losing 50%. “He personally lost everything in the collapse. After surviving the 1929 disaster, he returned to the market just before the true bottom occurred.”

By 1932, his $2.5 million had shrunk to just $375,000.

In his memoirs, Graham wrote about how early success shaped his mindset before the crisis:

At thirty-one, I was convinced I knew everything—or at least everything I needed to know about making money in stocks and bonds. I felt I had mastered Wall Street, that my future was limitless, and that I was destined to enjoy immense wealth and its associated material pleasures.

I pictured myself owning a large yacht, a Newport villa, and racehorses. I was too young to realize I was significantly affected by arrogance.

The good news is Graham ultimately turned things around. He refused a salary until all his investors were made whole. Despite the Great Depression’s devastating blow, his long-term performance remained impressive, and his impact on investor education is still felt today.

One of my favorite investment books is Brendan Moynihan’s What I Learned Losing a Million Dollars.

Moynihan tells the story of Jim Paul, a country boy from Kentucky who, in just a few years, went from poverty to becoming a millionaire trader at the Chicago Mercantile Exchange—then lost it all.

In the introduction, Moynihan describes the story:

“One premise of this book is that every rise sets the stage for a fall; every victory sets the stage for defeat. Without prior success, it’s actually hard to end up in disaster.”

It is often difficult for young investors who have experienced market success to understand this dynamic. Moynihan explains:

If you start from scratch and rack up a string of wins, you’re actually preparing for future failure because success creates psychological distortions—especially when you unknowingly break the rules yet still win. When this happens, you begin to think you’re special and exempt from the rules.

Advice for Investors

This bull market has produced huge profits for many.

Many investors have earned significant wealth. This is a significant achievement.

But it’s crucial not to let market success go to your head. This cycle won’t last forever. Earning profits will not always be this straightforward.

Eventually, market conditions may challenge your confidence, even if your abilities remain unchanged.

Notice:

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