I previously wrote an article regarding the top-down approach in investment. Now let’s look at a contrary approach which is also much practiced by the local unit trust fund manager: the bottom-up strategy.

According to Investopedia:

The bottom-up approach assumes that individual companies can do well
even in an industry that is not performing very well. This is the
opposite of “top-down investing”. Making sound decisions based on a
bottom-up investing strategy entails a thorough review of the company
in question. This includes becoming familiar with the company’s
products and services, its financial stability and its research reports.

In short, a bottom-up investor focuses on selecting a stock based on the individual attributes of a company. Comparison of companies based on fundamentals; as long as the companies are strong, the overall macro economy conditions are of no concern.

Consideration of fundamentals of a company includes:

  • low price-to-earnings ratio
  • high book value
  • future prospects, business outlook
  • company management team
  • market competitiveness
  • relative valuation
  • and many other considerations of the company’s performance

This investment approach is most suitable when the fund manager is close to his market – hence it is not appropriate to be used when investing globally.

Good investment selection for the bottom-up investors are those under-rated or under-researched companies that have the potential to unlock value in long term.

[poll=3]

Example of local unit trust fund houses that practice bottom-up approach:
Alliance Investment Management
Mayban Investment Management Sdn. Bhd.
OSK-UOB
OSK-UOB Global Equity Yield Fund
RHB Unit Trust Management Berhad

More tips about unit trust investmnt:
How to monitor unit trust portfolio using Signal Invest
Everything about Unit Trust in Malaysia
The secret of investing in Unit Trust
Ringgit or Dollar Cost Averaging
What do I look for in a unit trust fund?
Are Unit Trusts Lousy Investment?

Technorati Tags: ,


KCLau
KCLau

Personal finance author and trainer

    5 replies to "Bottom Up Approach in Unit Trust Investment Malaysia"

    • […] Allocator Related article about unit trust: Bottom Up Approach in Unit Trust Investment Malaysia Top-Down Approach in Unit Trust Investment The secret of investing in Unit […]

    • […] in Unit Trust Investment When is the Perfect Time to Rebalance our Investment Portfolio? Bottom Up Approach in Unit Trust Investment Malaysia Being a Lion Advisors of LTA […]

    • […] I think you shouldn’t miss: Investment replacement feature is not available in unit trust Bottom Up approach in unit trust investment Top-down approach in unit trust investment Unit trust company list in Malaysia The secret of […]

    • kclau

      Hi Khaled,
      You asked a great questions here. I would have to dig deeper to find out about that. I wish to get you some answers soon.
      Thanks for dropping by.

    • Khaled

      how ur opinion regarding measuring the unit trust performance by using Jensen model and, Henriksson and Mertons approach?
      it all this model are widely use in local unit trust fund houses?

Leave a Reply to Asset Allocation Application in Unit Trust Investment|Personal Finance Malaysia Cancel Reply

Your email address will not be published.