By investing in financial markets we look for undervalued securities. This search can be conducted in 2 ways: top down or bottom up. In this video I explain you the top down search shortly.
By top down investing investors first look for a good macroeconomic environment that is good for stock prices. With I mean they look for countries or zones where the economical cycle is performing well. This can be determined by looking at employment numbers, gross domestic product figures, export figures etcetera. This way of research is called top down as it looks down from the top of the economy. After finding countries/zones that are booming investors then look for which sectors are interesting to invest. And after having finished this then they look per sector which companies are under or overvalued.
This way of looking for investments is quite outdated. This because many countries are so interconnected that they are not stand alone economies anymore. The way of top down investing was in our eyes only useful when countries were not interconnected so that their state of economy was the major influencer of the local financial markets.
Nowadays bottom-up investing is much more sensible then top down investing. Because of this we built a very huge stock screener on our website Valuefokus.de. In another video we elaborate more about bottom up investing.
Video done by Tim van Thienen from Spiegelbeelden.nl and Denise Lindemann from YesInvest Media.