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 Explanation of The Zulu Principle

Private investors can develop their investment expertise by applying The Zulu Principle. This was the name of my first book on investment, taken from an idea I had after observing my wife read a four-page article in Reader's Digest on the subject of Zulus. As a result, within a few minutes she knew more than I did about Zulus and it occurred to me that, if she had then borrowed all the available books on Zulus from the local library, she would have become the leading expert in Surrey. If she had subsequently been invited to stay on a Zulu kraal (by an unsuspecting chief) and read about the history of Zulus at Johannesburg University for another six months, she would have become one of the leading experts in the world.

The key point is that my wife would have applied a disproportionate effort to becoming relatively expert in a very narrow subject. She would have used a laser beam rather than a scattergun and her intellectual and other resources would, in that narrow context, have been used to maximum advantage. So it is with investment - concentrate on an approach, such as buying growth shares or asset situations, or concentrate on a particular sector. That way, you will become relatively expert in your chosen area. It is only necessary to be six inches taller than the other people in a room to see above everyone's heads. Applying The Zulu Principle helps you grow those extra six inches.

I suggest that for most private investors their first (and possibly final) area of specialisation should be growth shares. They are by far the most rewarding investments. The upside is unlimited and, if the right companies are picked, the shares can be held for many years, during which the original stake should multiply many times. This approach is, of course, also very tax-effective.

Cyclicals are a different ball game. The aim is to buy them at the bottom of the cycle and sell near the top. The main problem is getting the timing right and then deciding when to reinvest.

Growth shares are far more relaxing, so I recommend concentrating on them.

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