Top-Down Investing


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.

BREAKING DOWN '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.

  1. Capital Markets

    Capital markets are markets for buying and selling equity and ...
  2. Investment Style

    The overarching strategy or theory used by either a retail investor ...
  3. Sector

    1. An area of the economy in which businesses share the same ...
  4. Bottom-Up Investing

    An investment approach that de-emphasizes the significance of ...
  5. Industry

    A classification that refers to a group of companies that are ...
  6. Economy

    The large set of inter-related economic production and consumption ...
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