Investment decisions refer to decisions made to put money in different asset classes, all with the objective of protecting and increasing wealth. There are many factors to consider when an investment decision is made: What are the risks involved? What financial instruments to use? Should you invest in bonds, stocks ,real estate or other asset classes?
To answer these and other questions, investors employ different sources of information.
Financial and Economic Theory
Financial and economic theory provides a strong foundation on which to base investment decisions. It serves as a guide in the wide array of choices available to investors these days. For example, in periods of high inflation, economic theory tells us that investors would be better off putting money in stores of value that rise with inflation, such as gold, while fixed-income securities like bonds should be avoided, as they yield a much lower return.
There are many source of financial intelligence. The primary sources of commentary and analysis are well-established publications, such as the Wall Street Journal or the Economist, as well as more specialized business intelligence products from business news agencies such as Thomson-Reuters or Bloomberg Business & Financial News.
Historical performance of assets (stocks, real estate, bonds and other vehicles) can often provide information about which way the asset prices will go in the future. While past is not always the best guide to what will happen, the underlying trends often hold sway for prolonged periods of time. If gold has been rising for the past five years, for example, the chances are that it will also rise in the next six months.
There are additional, asset-specific sources of information that investors can employ to help them make investment decisions. For example, if investors invest in bonds, they can read bond prospectuses, documents that accompany the issuance of bonds. If the assets in question are stocks, than annual and quarterly reports to the regulators and shareholders (primarily the annual financial report) can be accessed, with particular attention given to the profit and loss statement and the balance sheet.