A style of investing which focuses on individual companies (the bottom) and then moves on to consider industry analysis and economic forecasts. In other words, a typical bottom-up investor studies a set of companies (analyzing financial statements and the outlook of business) and attempts to select those which are highly likely to outperform the broader market based on individual advantages and specifics. Therefore, the emphasis of bottom-up investors is stock selection. The selected securities are, then, put together in one portfolio that will thereafter take into account industry or country exposures.
In this approach to investing, the chance for prediction errors and mistakes will be usually much lower than it when starting from researching and trying to predict a given industry or economy along the way down to an individual firm.
Bottom-up investing is the opposite of top-down investing.
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