Investment Management

The Top-down Approach

1

The top-down approach is a method used to analyze and choose securities. It involves looking at the bigger picture first (as in the whole economy), before looking at the specific company itself. 

2

An individual that uses the top-down approach will typically start by looking at how an asset class is likely to fare within the short-term world economic, political and social environment.

3

When undertaking the ‘big picture’ analysis of the economy, investors using the top-down approach will consider variables such as employment rates, GDP and inflation rates.

4

Top-down investors focus on the economic cycle to arrive at investment decisions. They will usually pick suitable investments for the phase of the cycle, before picking specific stocks, bonds etc.

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