Learn top down Investing

Top down investing is one of the methods used by investors to identify opportunities. What is top down analysis – read this investopedia link to familiarize yourselves with this approach , In short the diagram below depicts the approach

Top Down investing

Putting top down analysis in practice –  Download this excel , it has all active securities that currently trade on BSE. Now lets see how to use this sheet to do top down analysis

Step 1 – Identify the economy which is growing fast – In this case we stick to India as we intend to invest in Indian stock markets

Step 2 – Identify sectors that are growing fast in economy, now this is little tricky, We have to be aware what is happening around us,  you need to read articles like this and reports like this to know what sectors / industries are doing well

Step 3 – Once you have identified sectors, pick sector whose business is easy for you understand and one which you can explain to a school boy.

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Step 5 – Use financial websites to put together financial information of those companies for last 8- 10 years

Step 6 – Value companies using our stock calculator  or any other method that gives you confidence

Step 7 – Follow the ten point investor checklist

Step 8 –  There you go, now you have identified a brand new opportunity to invest and grow your money

Remember most investors don’t rely on only any single method for picking stocks. Top down investing is a very disciplined, clinical way to approach the problem, but it is not the silver bullet of stock picking.

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