What it is
Bottom-up investing is a way to assess investment options. It involves checking the performance of specific companies or assets before examining larger factors such as economic conditions.
When applying this method, you’ll start by looking at microeconomic data, like a company’s financial statements or competitive edge.
What it means for you
This is one of the strategies you can use to identify companies or investments that may perform well.
To apply this method, you should be skilled at (or at least be willing to learn) interpreting financial reports and numbers. You’ll also look at qualitative factors that may affect the current and future value of a company, such as leadership.
You may find success in bottom-up investing if you’re able to spot companies that can grow over the long term even when the industry it’s in or the economy is underperforming.
The opposite is a top-down approach. It focuses on macroeconomic indicators first before zooming into individual companies.
One method is not necessarily better than the other. You should assess your knowledge level and situation when choosing a suitable strategy.
