Macro investing is a top down strategy where investor analyzes broad economic data when developing an investment framework. Its one of the types in "factor investing" (other type is "style factors"- mometum, value,quality,size and etc).
Basically investors look into macroeconomic factors to find suitable assets(not limited to stocks) to express their economic outlook. These factors can be interest rates, inflation, liquidity, employment data,money supply,credit and etc.
Many hedge funds and mutual funds use Macro factors in their investing . Its not popular among retail investors as it requires some research and understanding on macroeconomic conditions.
As an analogy, its like understanding the direction and the strength of the tide to use the right boat type for the ride rather than finding the best boat in the yard.
Typically, retail investors only look into one or two asset classes.. primarily stocks and rely on fundametal anlysis of individual companies( Price ratios, earnings growth, EBITDA,business model, value chain and etc). This is a bottom up approach in contrast to Macro investing.
Even if you invest only on stocks, overlaying macro factors on top of your bottom up strategy can give you better results. Because macro trends are much powerful..not only driving individual stocks but the entire sector as a whole. In addition, macro trends tend to last longer (multi years) and help investors to generate bigger gains over time.
Macro investing is a top down strategy where investor analyzes broad economic data when developing an investment framework. Its one of the types in "factor investing" (other type is "style factors"- mometum, value,quality,size and etc).
Basically investors look into macroeconomic factors to find suitable assets(not limited to stocks) to express their economic outlook. These factors can be interest rates, inflation, liquidity, employment data,money supply,credit and etc.
Many hedge funds and mutual funds use Macro factors in their investing . Its not popular among retail investors as it requires some research and understanding on macroeconomic conditions.
As an analogy, its like understanding the direction and the strength of the tide to use the right boat type for the ride rather than finding the best boat in the yard.
Typically, retail investors only look into one or two asset classes.. primarily stocks and rely on fundametal anlysis of individual companies( Price ratios, earnings growth, EBITDA,business model, value chain and etc). This is a bottom up approach in contrast to Macro investing.
Even if you invest only on stocks, overlaying macro factors on top of your bottom up strategy can give you better results. Because macro trends are much powerful..not only driving individual stocks but the entire sector as a whole. In addition, macro trends tend to last longer (multi years) and help investors to generate bigger gains over time.