Investment strategies

2- Bottom up investing
The opposite extreme bottomup investing takes a micro approach,
starting with investment fundamentals of individual stocks before
moving upward to include an analysis of the industry environment,
overall economic factors,and other factors that could impact the
prospect of the company.
This approach focus on individual stock selection. Looking for stocks
that are undervalued and expected to perform best in the future.
While industry, sector, and economic factors takes on less importance
that company's fundamental. such as earning growth, product, and demand
of that product in the market.

Top down investing.

There are two basic overall strategies for approaching the investment
decision-making process: the top down approach and bottom up approach.
Each one takes a considerably different path to making the investment
decision.

Top down investing first concentrates on analyzing the big picture
before moving downward towards choosing the individual security in which
to invest. Taking the macro approach begins with in investigation and
analysis of economic environment. (depending on the expertise of the
investor, available investment resources, and the overall investment
goal, economic analysis could be limited to the domestic economy or
expanded to include global focus.)

The investor also works to gain a perspective of projected interest
rates, anticipated economic growth rates, changing tax and monetary
policies. the competitive environment, political factors, and the
direction of stock market.

Next, the investor turns to an analysis of which industries and or
market segment stand to benefit or suffer most from the most likely
economic and political conditions. For example, in the wake of warming
relation between the east and west, future prospectus and earning of
many defense companies quickly eroded. A correct prognosis of the
emerging situation could have positioned an investor to short stocks of
specific companies heavily dependent on defense business and most likely
to be negatively impacted by slashed defense budgets.

Moving from the industry analysis, the investors reviews the prospects
of individual firm in order to make the best investment choice.