Top-down and bottom-up

Investors can use either a top-down or bottom-up approach.

• The top-down investor starts his analysis with global economics, including both international and national economic indicators, such as GDP growth rates, inflation, interestrates, exchange rates, productivity, and energy prices. He narrows his search down to regional/industry analysis of total sales, price levels, the effects of competing products, foreign competition, and entry or exit from the industry. Only then he narrows his search to the best business in that area.
• The bottom-up investor starts with specific businesses, regardless of their industry/region.