Which factor is essential in reviewing investments effectively?

Understanding historical performance data is essential for effectively reviewing investments because it provides insights into how an investment has behaved over time under various market conditions. Historical performance data can reveal trends, such as whether an investment tends to rise in value during economic growth or decline during downturns. By analyzing this data, investors can make more informed decisions about future potential and risks associated with specific investments.

Moreover, this understanding helps in assessing the volatility and stability of different investment options, allowing investors to align their portfolios with their own risk tolerance and financial goals. Analyzing historical performance is key to evaluating whether an investment will continue to meet the investor's needs and expectations going forward.