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Top-Down Investing

Dictionary Says

Definition of 'Top-Down Investing'

An investment approach that involves looking at the "big picture" in the economy and financial world and then breaking those components down into finer details. After looking at the big picture conditions around the world, the different industrial sectors are analyzed in order to select those that are forecasted to outperform the market. From this point, the stocks of specific companies are further analyzed and those that are believed to be successful are chosen as investments.
Investopedia Says

Investopedia explains 'Top-Down Investing'

An investor may use different criteria when deciding to employ the top-down approach. For example, an investor may consider such factors as geography, sector and size. What is important with this approach is that a big picture perspective is taken first before looking at the details. Although there is some debate as to whether the top-down approach is better than the bottom-up approach, many investors have found the top-down approach useful in determining the most promising sectors in a given market.

Articles Of Interest

  1. Top-Down Analysis: Finding The Right Stocks And Sectors

    The top-down investment strategy depends on economy and market strength. Find out what you should know before jumping in.
  2. Technical Top-Down Investing: Analyzing The Market

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  3. What's the difference between "top-down" and "bottom-up" investing?

    Before we look at the differences between top-down and bottom-up investing, we should make it clear that both of these approaches have the same goal - to ferret out great stocks. Now, let's look ...
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