Bottom-Up Investing

What is Bottom-Up Investing?

Bottom-up Investing is an investment approach that focuses on the analysis of individual stocks and de-emphasizes the significance of macroeconomic cycles and Market cycles. Bottom-up investing forces investors to consider microeconomic factors first and foremost. These factors include a company's overall financial health, the products and services offered, analysis of financial statements, supply and demand, and other individual indicators of corporate performance over time.

In bottom-up investing, an investor or advisor takes the stance that the best investment Portfolio will not be a broad allocation across market indices, but that an optimal portfolio should be built from the bottom-up with the Bonds and stocks of individual companies whose fundamentals and individual potential have been analyzed.

Bottom-Up Investin: Pro’s Con’s

Bottom-up investing allows an investor to become very familiar with a business in which he plans to invest money. In essence this approach is similar to running your own business and determines you would run your business to generate the most efficient returns. Many company’s pay dividends to investors which is attractive to most considering stock investments.

The downside to bottoms up investing is the amount of time it takes to research and analyze the workings of an individual company.