- Ideally, the price of every asset you buy will go up. However, the future is unpredictable and you have to gather the best information you can to make an educated guess. Stocks, bonds and mutual funds must be sold with disclosures or a prospectus that discloses previous price movements. For real estate, county records often keep sales records that allow you to track how a home value has changed over time. For example, in Greenville County, South Carolina, you can look up the taxable market value of a house each year going back to 1995.
- Investments are made for different reasons. Some are planning for retirement, others are saving for college, while others are saving money they may need on any given day. For each of these objectives, it's prudent to choose an investment with a time horizon and growth strategy similar to your own. Make sure this information is articulated in plain language before making a purchase. For example, a mutual fund prospectus from Charles Schwab clearly states the investment objectives and describes the different investment risks with the fund.
- Some investments are guaranteed by the federal government and some are not. The Federal Deposit Insurance Corporation is a federal agency that insures deposit products at participating banks to protect the stability of the financial system. Checking accounts, savings accounts and certificates of deposit (CDs) are insured by the FDIC. Stocks, bonds and mutual funds are not. Financial institutions are required to disclose the presence or absence of FDIC insurance in their disclosures, so ask about it if such a guarantee is important to you.
- The performance of an investment is heavily affected by how much taxes you have to pay on your gains. Professor James Poterba of MIT found that taxes heavily affect how much a saver will have in retirement, independent of an asset's return on investment. Investors who receive interest must fill out a 1098 form to report the income, and real estate and stock investors have to pay capital gains tax when they sell the property. Being aware of how your investments are taxed is important to know when you make your initial investment so you can choose one appropriate for your investment strategy.