One of the approaches on valuation discussed in the previous NCFM module5 was the so-called top-down valuation. In the top-down approach, an analyst investigates both international and domestic economic indicators, such as GDP growth rates, energy prices, inflation, interest rates etc. The search for the best security then trickles down to the analysis of total sales, price levels and foreign competition etc. in a sector in order to identify the best business in the sector.

In the bottom-up approach, the analyst starts the search with specific businesses, irrespective of their industry/region.