Basics of Investment Analysis
Investment Analysis sounds like something only experts can do, but let’s simplify it. It is the process of evaluating an investment from different angles to determine whether it will be profitable.
Factors that play a significant role in investment analysis are the duration of an investment, its weight in the portfolio, and the investor’s overall risk appetite. Most investments are analyzed in one of the two ways, the top-down or bottom-up approach.
In the top-down approach, analysts study the economy and industry before shortlisting a few stocks out of which money is invested in the best few. In contrast, the bottom-up approach involves investing in a fundamentally strong company irrespective of the broader industrial or economic outlook.
Can you differentiate between different methods of analysis?