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Can Swiss Cheese Really Help Us Become Better Investors?

Have you ever heard about the “Swiss Cheese” technique?

This is not some weird cooking method practiced by celebrity European chefs. Nor is it some unusual way of eating Emmental, Gruyère or Raclette.

Instead, the “Swiss Cheese” process is a time-management procedure described by Alan Lakein, who is also the author of “How to Get Control of Your Time and Your Life“.

All change

Lakein reckons that when we are faced with an onerous task, one of the best ways to tackle the chore is to break it down into more digestible pieces.

By doing just little bits a time, we should eventually reach the point when we can comfortably finish the once-unwieldy undertaking. That is because it is now more manageable.

The “Swiss Cheese” method is something that has changed not only the way that I approach work but also the way that I invest, which leads me to the nub of this week’s newsletter.

In years gone by, it was nigh on impossible for many of us to buy small parcels of blue-chip stocks for our portfolios here in Singapore. That was not because of a lack of enthusiasm on our part to accumulate good shares over the long term. Instead, it was because we couldn’t do it practicably, if we could even do it at all.

But all that is about to change.

Life-changing moment

From January next year, we will witness one of the most momentous changes to the way that we look at shares in Singapore, forever. It will be the investing opportunity of a lifetime.

On 19 January 2015, the lot sizes for buying Singapore stocks will be slashed from 1,000 shares to just 100 shares. It will be a life-changing moment. Just think about how that could appreciably alter the way that we invest.

Gone will be the days when we are forced to look at share prices rather than their valuations to decide whether we should include them in our portfolios. No long will we have to make unnecessary compromises to the way that we buy shares.

Many of us who, for example, have hankered after some OCBC (SGX: O39), DBS Group (SGX: D05) or UOB (SGX: U11) will no longer have to stump up S$10,000, S$20,000 or S$23,000 at one go to do so. Instead, the considerations could be a more affordable S$1,000, S$2,000 or S$2,300.

The affordability of shares could not be starker if we consider some members of the Jardine Group of companies. Jardine Strategic Holdings (SGX: J37), Jardine Cycle & Carriage (SGX: C07) and Jardine Matheson (SGX: J36) could now be more affordable when lot sizes are cut.

From January, we could all start to build and own portfolios of good quality stocks.

Quality not quantity

By adopting a “Swiss Cheese” approach, we can gradually accumulate quality shares for the long term. Simply by adding, adding, adding prime stocks over the long haul, we can slowly increase our exposure to some excellent wealth-creating companies.

But the “Swiss Cheese” technique works on another level too.

It can be useful reminder that we don’t need to rush into building our portfolios overnight. We can afford to take our time. Warren Buffett once said: “If we can’t find things within our circle of competence, we don’t expand the circle. We’ll wait.

Buffett’s advice is a statement of genius. When we invest, we should only consider buying shares in companies that we understand thoroughly. Buying something that we know nothing about can be a recipe for ruin.

Peter Lynch said something similar. He quipped: “Your investor’s edge is not something you get from Wall Street experts. It’s something you already have.

There is a lot that we can learn from the investing masters. So sharpen your investing knives and get ready for the investing opportunity of a lifetime.

I’ll leave you this week with a well-trodden Alan Lakein quote: “If you fail to plan, you plan to fail”.

A version of this article first appeared in Take Stock Singapore.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.