Seth Klarman – The Definitive Guide On Why Bottom-Up Investing Trounces Top-Down Investing

There’s a lot of discussion on which is the better investing strategy, bottom-up investing or top-down investing. The definitive guide can be found in Chapter 7 of Seth Klarman’s book, Margin of Safety.

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Here’s an excerpt from that book:

There is no margin of safety in top-down investing. Topdown investors are not buying based on value; they are buying based on a concept, theme, or trend. There is no definable limit to the price they should pay, since value is not part of their purchase decision. It is not even clear whether top-down-oriented buyers are investors or speculators. If they buy shares in businesses that they truly believe will do well in the future, they are...