Bottom-Up Investing

  

Categories: Investing, Stocks, Bonds

See: Fundamental Investing.

Bottoms up. No, it's not a dive bar near the airport. Rather, bottom-up starts with a fundamental approach to investing, wherein investors start with the very basics of what a company does for a living...i.e. "at the bottom" of their value-adding-process-food-chain.

What does the company make? Is it valued and/or valuable? (Like...the company might be awesome at making pro-level swimsuits, but the entire market is maybe 3,000 people total, worldwide, so...not that valuable a niche to really "own.") Is the company's product hard for competitors to replicate? Is demand sustainable and high, such that profit margins will remain high for a really long time?

Those are all the questions that go with bottom-up "fundamental" investing. They do not include, "So...uh, do you validate for parking?"

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Finance: What is Compounding Value or Co...1773 Views

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Finance allah shmoop What is calm Pounding value or compounding

00:06

interest Ah the power of compounding it makes tree's stronger

00:12

pollution More feral and the rich Well richer How so

00:16

Well let's start with compounds kissing cousin with six toes

00:20

Arithmetic calm pounding Right So the first was really geometric

00:24

compounding Now we're talking about arithmetic compounding If you invest

00:27

a thousand bucks in a ten year bond that pay

00:29

six percent a year in interest the dough comes back

00:32

to you in a pattern that looks like this Like

00:35

every six months they pay thirty bucks and it's sixty

00:38

dollars a year Got it nice You get the total

00:41

of sixteen hundred bucks back from your investment And the

00:44

cash that came back to you you know came in

00:47

small parts all along the way until you got about

00:50

two thirds of it or sixty percent at the end

00:52

right If you just spent that money and collected your

00:55

thousand bucks at the end That's it Okay So that's

00:58

arithmetic compounding the money comes to you You don't reinvest

01:01

it Ding ding ding that's the key here and you

01:03

just go buy burgers Okay So now let's look at

01:07

what six percent compound id looks like over the same

01:10

ten year period Wealth at the end of your one

01:12

it's a thousand sixty bucks and no we're only going

01:14

to compound it annually We probably should do the semi

01:17

annually but we confuse you even more is we won't

01:19

do that but then you essentially re invest that money

01:22

and you get another six percent compounded on that thousand

01:25

sixty instead of six percent compounded against the original thousand

01:29

so by the end of your two you'll have a

01:31

thousand one hundred twenty three sixty and by the end

01:34

of your ten you'll have one thousand seven hundred ninety

01:36

dollars and eighty five cents So why do you make

01:40

so much more money when you compound interest versus getting

01:44

thirty bucks twice a year like you would in this

01:46

bond example going by and burgers with it You don't

01:49

wanna do that well essentially what's happening is that you're

01:52

delaying your gratification of getting that sweet sweet cash or

01:57

getting liquid Whatever you wanna call it by reinvesting your

02:00

gains year after year after year So do you have

02:03

that sort of self control Do you need the cash

02:06

Yeah that's The question If you for example have trouble

02:09

making it home from your local pizza spot with the

02:12

pie intact well and compound interest Keeping the discipline to

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not spend the money today and wait for the happiness

02:18

tomorrow Well when that may not be for you Sorry

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