What is meant by bottom up investing Should you go for it?

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.

How does bottom-up investing work?

Before picking up stocks, bottom-up investors study a company’s overall financial health, financial statement analysis, demand, and supply statistics, among others. Based on these microeconomic factors, investors decide whether buying securities of the company is a risky affair or not.

Advantages of bottom-up investing

• Since bottom-up investors are highly familiar with the company’s fundamentals and its internal working, they are in a better position to predict the future performance of its securities.

• There are companies that tend to pay dividends to bottom-up investors. Disadvantages of bottom-up investing

• Since bottom-up investing does not consider macroeconomic factors and only focuses on a particular company or security, investors may face challenges later.

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

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