Asset allocation is all about determining where you want to put your money. There are many options available when investing, and making the right decision is crucial. In order to begin asset allocation, you have to gauge where you currently are financially. First of all, you should not invest in the stock market if you have less than $10,000. The risks are too great and the returns are not large enough to make it worth the risk. To get a picture of where you are, you should do a balance sheet. This takes into account all of your assets, investments, debt, incoming money and outgoing money to find out how much actual money you have to utilize. After you have determined the amount of money you are willing to invest, it is time to determine where you will put that money. There are many options to choose from, such as stocks, bonds, treasury bills and real estate. You will need to know your investment risk profile before undertaking the task of allocating your assets. Many people allocate their assets depending upon how much of a risk they are willing to take. Many experts use the term “justification” for when people invest in certain sectors because they believe that certain sector is “due” to perform well.

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As well as trend signals, you should look for action signals. These signals aren’t seen very often, but you need to get in there when they do. The two biggest action signals are when a company’s shares suddenly hit a new high; this means everyone holding those shares is in profit and no-one is going to bail out – chances are, the price will climb even higher.

An even rarer sign that signals market growth for a company is when new shares are released and their price doesn’t fall, as is usual, due to volume. This means canny investors may well have spotted that next big thing, and you should at least have a good look.

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