In last week’s Alert, we began a four-part series on getting your 2011 financial house in order. Part I was all about conducting an inventory of all of your assets and all of your accounts -- taxable accounts, retirement accounts, insurance and annuities, etc. The goal of last week’s lesson was to have you calculate your liquid net worth to see where you really are as we begin the year.

Today, we are going to look at Part II of the series: Do an Asset Allocation Review.

Now is the time to dig down deep into precisely where your assets are, and by that I mean knowing specifically which stocks, bonds, exchange-traded funds (ETFs), mutual funds, variable annuities, etc., you currently own. You also need to know how much you own of each security. Your goal this week is to take an inventory of all of your holdings so that you can see if there are any glaring weaknesses and/or omissions in your asset allocation.

Once you know, in percentage terms, how much of your total investment portfolio is committed to stocks, how much to bonds, commodities, cash, etc., you can make the necessary adjustments to get your desired mix of assets where you want them.

I am of the opinion that stocks will easily outperform bonds in the first half of 2011. And while there is bound to be some ups and downs in both the equity and bond markets, I think the more successful portfolio will prove to be the one with higher equity allocations.

Finally, if you find that you have a relatively high cash allocation -- and I know many investors do -- there’s nothing to be worried about. I think there’s still plenty of upside left in stocks, but you need to start the process of getting yourself positioned to take advantage of that upside.

Take the necessary steps to understand what investments you currently own now. Then the next step is taking action by knowing what stocks and ETFs to buy from here. That next step will be the focus of Part III in our series, which we’ll bring to you next week.

If you want to get a leg up on what investments may be right for you in 2011, I invite you to check out my upcoming teleseminar. For all the details on this event, please see the section below.