Bottom-up investing is the practice of looking for solid companies and investing in them as opposed to investing in indexes and basing that decision on broader market/macro conditions.
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 stocks and bonds of individual companies whose fundamentals and individual potential have been analyzed.
This requires some intensive research and analytical experience. Fundamental analysis compares the books and market position of a company with that of its peers. The idea is that companies can be identified who are likely to outperform the market, or to continue to perform well during dips in the overall market.
This strategy is the opposite of top-down investing, which seeks to identify broad macroeconomic trends and to invest in entire industries and sectors using primarily index funds and broad portfolios, such as those found in mutual funds and ETFs.
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