Top-Down Investing

An investing methodology in which the investor first analyzes the economy, then chooses industries and finally individual stocks.

Top-down investing is recommended for individual investors, because it allows the investor to see the forest and not just the trees. Since individual investors have a limited amount of time and resources, they cannot conduct a fullscale research of all companies and industries from the bottom-up. Top-down investing allows them to pinpoint opportunities more efficiently.

CANSLIM can be argued to be a form of top-down investing as investors first determine market direction, then look for strong stocks that are in strong industries.

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