A top-down approach to investing means first looking at the behavior of the broader market, for example the entire country in which you are investing, and then looking at the stock markets. stocks, then regions, then industry groups, then stocks. What you&#39;re looking for is the area with the best performance at each level. The theory behind this strategy is that a stock&#39;s performance depends largely on the overall performance of its sector or industry group. In fact, a study cited by Investor&#39;s Business Daily found that 37% of a stock&#39;s movements are directly related to the performance of the industry in which that stock is located, and 12% of the moves are related to the performance of the stock&#39;s industry. the strength of that stock&#39;s entire industry. So making sure that the stocks you buy are in the &quot;hottest&quot; industries and regions or at least not in the gloomy industries is a very good idea.<br />You can think of top-down investing as a high-to-low chart.<br />The pinnacle will be the country, for domestic investors. For global investors, it could be whichever country has the best performing economy at the moment.