Heightened volatility in the markets has left many wondering — again — what to do with their nest egg. As the ripple effects from the global credit crunch play out, what can you do to protect yourself and your family?

If you don't happen to be particularly savvy yourself when it comes to things financial, it makes sense to have a trusted expert to help you manage your investments, analyze your long-term cash flow needs, and plan for your life in retirement.

Considering the ongoing unpredictability in the markets, asset allocation, with regular rebalancing, is still the investment strategy that works best over the long haul.

Here are some common asset allocation mistakes:

Too conservative. With memories of the terrifying financial meltdown still fresh in their minds, many people are one step away from hiding their money under the proverbial mattress. They're 100 percent in "safe" investments like CDs and Treasuries.

First of all, the value of Treasuries currently has nowhere to go but down, since interest rates have nowhere to go but up. More fundamentally, instruments like CDs and money market funds are virtually the only instruments guaranteed to lose value against inflation.

It's a particularly bad move for young and middle-aged people whose investments need to work for them over several decades and can therefore withstand more risk.

Opportunity: Examine your true investment horizon and risk tolerance, and set your asset allocations accordingly. You may discover that you're playing it far too safe.

Too risky—no safety net. At the other extreme are investors who are betting their entire financial future on stocks—particularly if they're making heavy bets on a few companies.

Being over-concentrated in equities is an almost surefire recipe for disaster—especially if you're older and need to live off these investments in the short term.

Opportunity: Could you really withstand a big potential short-term loss? If not, start moving some of your money into more diversified holdings ASAP. If you can't make an honest self-assessment, talk to a qualified professional financial planner—preferably a fee-only planner who doesn't get sales commissions.

Too boring—not taking advantage of all investment classes. Asset allocation used to mean dividing up your investments among stocks and bonds according to your risk tolerance and personal situation. That's still a key part of the process—but only part.

To get true diversification, you need to add other asset classes, such as real estate and commodities, to your investment mix, because they tend to "zig" when the stock market "zags." That doesn't mean that you need to buy up apartment buildings or pork bellies. Investors can readily invest in real estate through real estate investment trusts—or REITs—which typically pay hefty dividends. And commodities are readily available through index funds. Our research shows that adding commodities and real estate to a portfolio—with regular rebalancing—can improve a portfolio's total return and reduce volatility.

Opportunity: Spice up your portfolio. When you set your asset allocation, make room for commodities and real estate. These are volatile investments, so don't overdo it. A relatively small allocation can go a long way toward improving your overall portfolio.

Remember: It's about you — not the markets. Whatever asset allocation you decide upon, make sure you do it based on your unique situation. What's important are your goals, your risk tolerance, your lifestyle, your life expectancy, your tax situation - in other words, your own individual set of financial circumstances. What's not important is what you, or anyone else, thinks the markets are going to do this year. And once you decide on your allocation, stick with it (rebalancing back to it as necessary) — it should change only when your circumstances change, not when the markets move.

One of America's leading authorities on asset allocation, Miccolis, CFA®, CFP®, is a senior financial advisor, Chief Investment Officer and co-owner of Brinton Eaton , a boutique wealth advisory firm in Madison, N.J., serving individuals and institutions throughout the U.S. He is also author of Asset Allocation For Dummies® (Wiley 2009).