Investment Learnings: A ZWM Theory 101
Core principles, distilled from 25 years of client conversations
Our first pamphlet traced the history. This one collects the recurring lessons and the ideas we return to again and again when explaining why we invest the way we do. Each extract is drawn from our own newsletter archive, in the words we used with clients at the time.
It's the Assets, Not the Fund
“Ultimately, it’s about the assets you’re invested in and not the fund. One of the dangers of investing in funds (or unit trusts) is that you lose sight of the actual assets you are invested in... a fund is merely a conduit for holding those shares. Investor returns are really derived from the ability of the managers of those underlying companies... to grow profits.”
- Opening words, July 2011 Newsletter
Diversification, The First Wonder
“Diversification is one of the 7 investment wonders of the world, along with other concepts such as compounding, time and asset allocation... Diversification is important because it reduces risk in a portfolio and it helps to improve the potential investment outcomes that can be expected.”
- “How Much ‘Offshore’ Is Enough,” January 2016 Newsletter
Why Offshore, Specifically
“South Africa represents approximately 0.80% of the MSCI World index. If you were an extra-terrestrial visiting earth to make an investment of your hard-earned intergalactic Dollars, would you not spread your investment globally?”
- January 2016 Newsletter
Compounding, Cost, and Uncertainty
Compounding, The Silver Bullet
“Only when you are watching the numbers can you appreciate [compounding’s] power - it’s exponential with time... Compounding doesn’t need extraordinary returns to work, because its main ingredient is time.”
- Q4 2024 / January 2025 Newsletter
Costs Are the One Thing You Can Control
“Compounding is more adversely affected by higher cost than by mediocre returns. Costs always create drag and, a bit like compounding, they tend to have an exponential effect.”
- Q4 2024 / January 2025 Newsletter
Living With Uncertainty
“Surprise in investing is inescapable, not an incidental anomaly... Only with uncertainty is there opportunity. If we knew the whole future, returns would be baked in the cake, and decision-making would be a lost art... Victories go to the tortoises, not the hares.”
- “The Heart of the Matter,” Peter L. Bernstein, reprinted Q3 2025 Newsletter
Manager Styles and Market Cycles
Value vs. Growth
Two broad schools of active management recur throughout our archive. Value managers buy companies trading below their assessed worth; growth managers pay up for faster-expanding earnings. Which wins depends heavily on the interest-rate cycle.
“Value has historically outperformed growth in the aftermath of recession. Rising interest rates make the alluring future cash flows of growth stocks less attractive.”
- Newsletter, 30 September 2022
Reversion to the Mean
“It is a playing out of investment 101 theory - reversion to the mean, and that high returns always come with higher risk.”
- on a manager’s cooling performance, Newsletter, 30 September 2022
Quality Over Cheap
“‘The best investments are often the most obvious,’ says Terry Smith, justifying the 600% return on Domino’s since the fund’s inception... invest in good companies over cheap shares.”
- January 2016 Newsletter
Skill vs. Cycle
“Never confuse a good manager for a bull market.”
- Lynn van Coller, Investment Process Notes, October 2020
Special Feature
Portfolio construction, by Dr Lynn van Coller
Head of Portfolio Construction at RMB Asset Management, Dr van Coller contributed “Why Worry About Portfolio Construction?” to our July 2011 newsletter, including a concept worth carrying forward: the ‘transfer coefficient,’ a measure of how much of a manager’s return actually comes from skill, versus luck.
“The aim of portfolio construction is to give clients peace of mind with regard to the achievement of their investment objectives through reliably generating competitive, risk-adjusted returns over a full market cycle.”
- Dr Lynn van Coller, Head of Portfolio Construction, RMB Asset Management - July 2011 Newsletter
“A manager’s ability is... difficult to determine. Van Coller notes the need to balance risk and return, which is not that easy in practice — ‘the art of successful portfolio management is not only to be able to identify opportunities, but also to balance them against the risks that they create in the context of the overall portfolio.’”
- Dr Lynn van Coller, citing Robert Litterman (Goldman Sachs) - July 2011 Newsletter
“You cannot manage outcomes, you can only manage risks.”
- Peter L. Bernstein, cited in Dr van Coller’s feature - July 2011 Newsletter
Twenty-five years of newsletters, and the lessons keep circling back to the same handful of ideas: diversify, keep costs down, let time compound, know what cycle you’re in and manage risk, because outcomes were never yours to manage in the first place.
- Luciano Zaina, Director