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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.
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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.
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Use a global view to determine which stocks belong in your portfolio.
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Find the investing "sweet spot" by combining these two styles.
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The top-down investment strategy depends on economy and market strength. Find out what you should know before jumping in.
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The top-down investment strategy depends on economy and market strength. Find out what you should know before jumping in.
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In this feature, we take an in-depth look at the various techniques that determine the value and investment quality of companies from an industry perspective.
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