Top-down investing is a type of investment strategy that focuses on the wider economy. A top-down investor will commence their investment decision by taking a look at factors such as interest rates, exchange rates and GDP.
By investing the respective areas, a top-down investor will then narrow down their share picking choices and further analyse specific sector characteristics such as competition and barriers to entry.
Following this, the company will then select shares in their preferred sector to invest in.
This contrasts to a bottom-up investing approach in which an investor places the main focus on a company itself first and foremost, regardless of wider economic trends.