Stableford Capital Insights

Investment Options: What is the Trifecta of Portfolio Construction?

Recently, a client asked us to explain the key differences between top down investment options and bottom up investing. Both strategies point you toward the same goal: to find great stocks that will yield profitable gains. However, the two strategies will lead you down two very different investment planning roads. Which is best for you, and which does Stableford Capital employ?

A Broad Overview at the Top


In top down investing, also known as macro investing, you start by analyzing the big picture: macroeconomic factors such as the economy and business cycles. Then you choose sectors and eventually individual stocks to review. Stock selections are made based on sector or industry. You do some research on company financials within that sector or industry, but the primary goal is choosing an industry and then a solid company within that industry.There are key benefits to top down investing. It can help an investor narrow in on searches, such as a specific country or currency, since currency values are based upon macro-economic factors (hence macro investing). The research can be easier, too, since the big details like currency exchange rates and public spending in a specific market are generally already compiled by governments and non-profits. And with a macro investing strategy, an eye is usually kept on both global economics and geopolitical issues. This helps to avoid risky areas and sectors while being able to see and swoop in on rising sectors.Now the down side. Narrowing in on specific sectors and industries means eliminating others, leading to potential missed opportunities. Sectors can also change quickly, so top down investment stocks tend to be traded quickly and often. Then there’s diversification, or a lack thereof. A top down portfolio may have concentration risks if stocks are only in specific

Build from the Bottom Up

Bottom up investment options part of Stableford Capital portfolio construction

In bottom up investing, you make stock selections based on the individual company’s attributes, like financial environment and direction. Macro-economic trends still play a role in final selection, but are not weighted as heavily as the company. A lot of research goes into screening potential companies to invest in, and you may make special consideration for companies that appear to be struggling but have a solid foothold in the market with a promising outlook.Since macro trends don’t drive the stock selection, virtually every stock is an option. The vast number of stocks to sort through can be overwhelming and, for some investors, a downside to bottom up investing. But this can also be a big benefit. Since all sectors are on the table, you can take advantage of opportunities in poor performing sectors. You can also better diversify your portfolio when you consider all sectors, countries and industries. So much research goes into selecting the right stock in the right company, that bottom up investments are usually traded less frequently than top down investments. Investments may take longer to pay out but are usually less risky.

Investment Options and The Stableford Strategy

Stableford’s approach? We use both top down and bottom up strategies – and more. Portfolio construction is a combination of top-down, bottom-up and technical analysis. It’s important to remember that there are times in every cycle where the emphasis is the combination of all three disciplines or influenced singularly.Many financial advisors take the top down approach. To truly be effective with this strategy, advisors must have a depth and breadth of experience, as it requires looking at where the market is in relation to the different fundamentals. The bottom up look is that added step – a powerful approach when combined with top down and exactly what Stableford does.We start with company-by-company research. We ask, “why is this a good purchase and how does it fit into the cycle – is there a better time to buy?” Then we take it a step further with a technical analysis after the bottom up research and before we make a change. This may help us discover a more opportune time to enter.

Active Investing: The Trifecta of Portfolio Construction

How you manage the blend of these approaches is what makes the Stableford investment process historically successful. Our clients are able to take advantage of our knowledge, our leadership, and our detailed step-by-step approach to investment options. The diversity of experience means that we have a deep understanding of the economic fundamentals – and it’s just one way we differentiate ourselves from other investment firms. To see what investment options are open to you or to make a change to your portfolio, reach out to Stableford Financial Counseling at 480.493.2300.  

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July 8, 2024
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by Stableford Capital
Andrew Brinkman
Andrew J. Brinkman is the Founder of Stableford Capital. Over the course of his 45+ year career, he built A.J. Brinkman & Co., a leading foreign exchange arbitrageur and institutional floor broker, was a managing partner of Petros Capital, a long/ short institutional hedge fund and, for the past ten years, he has been a discretionary asset manager for high net-worth families. Andrew Brinkman has been a member of the Chicago Mercantile Exchange, the New York Futures Exchange, and the Chicago Board of Trade. A 1978 graduate of Cornell College with degrees in Economics and Political Science, he was a board member for ChildHelp USA, a board member of the Berry Center for Economics, and former trustee of Cornell College.