NISM-Series V-A: Mutual Fund Certification Exam Notes
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A bottom-up approach on the other hand analyses the company-specific factors first and then evaluates the industry factors and finally the macro-economic scenario and its impact on the companies that are being considered for investment.
Stock selection is the key decision in this approach; sector allocation is a result of the stock selection decisions.
Top down approach minimizes the chance of being stuck with large exposure to a poor sector.
Bottom up approach ensures that a good stock is picked, even if it belongs to a sector that is not so hot.
Standard Deviation - is a measure of total risk in an investment. As a measure of risk it is relevant for both debt and equity schemes.
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