What is meant by bottom-up investing? Should you go for it? by Scarlett S.

Summary

Bottom-up investing focuses on the microeconomic factors such as analysis of individual stocks.

Bottom-up investors assume that individual companies can excel even if the industry underperforms.

This investing approach also requires significant time and effort to research every aspect of a business.

Investing is generally divided into two broad approaches. While the first one considers various macroeconomic factors such as the gross domestic product, and geopolitical situation, the second one analyses the performance of a company or its shares without focusing on macroeconomic conditions. The second type of investing approach is referred to as bottom-up investing.

Bottom-up investing focuses on the microeconomic factors such as analysis of individual stocks and ignores the significance of macroeconomic cycles and stock market cycles.

Investors with bottom-up investing approach assume that individual companies can perform well even in an industry with weak performance or in times of sluggish overall economy. Thus, they find it more important to focus on a particular company and its fundamentals.