When the future is uncertain, as it always is on Wall Street, the best defense for mutual fund investors is a broadly diversified portfolio. But sometimes people confuse diversity with owning many different funds, and they wind up with a hodgepodge of investments that don't perform in harmony with one another.

The key to protecting the wealth you've accumulated over the years is smart asset allocation — making sure your whole nest egg isn't tied up in one basket. That can make your portfolio more efficient and give you peace of mind, even when the market doesn't go your way.

Think of the care we take in mapping out our career paths. We seek advanced degrees, we plot our moves up the chain of command and have a vision of where we want to go. But when it comes to investing, we often end up shooting from the hip, making decisions based on tips we see in magazines or on TV, or suggestions from co-workers and friends, said Richard A. Ferri, author of "All About Asset Allocation."

If this describes the way you've accumulated your assets, chances are your portfolio is not working as hard as it could.

"Right now, stop everything, develop a plan. A long-term plan that will work for you for the rest of your life," Ferri said. "This is about reaching financial security. And that doesn't mean getting rich. The right asset mix can help you achieve financial security, not only for yourself but maybe for your heirs."

If you allocate your assets wisely, you'll be exposed to all parts of the market, and won't be left scrambling after the herd when one area gets hot. Your portfolio would already hold real estate, commodities and international stocks, at levels appropriate for your risk tolerance. When these areas do well, all you have to do is collect your profits when you rebalance.

In short, asset allocation "is the second-most important decision investors make," said Robert R. Johnson, a managing director at the CFA Institute, a nonprofit group that certifies financial analysts. "The most important decision is to invest in the first place."

It's easy to get distracted by the complexities of deciding which stocks, bonds and mutual funds to buy. There are so many available. But it's a mistake to buy the ingredients of your portfolio before you've figured out your recipe for investing success. And knowing what you need, and why you need it, will make buying the actual securities that much easier.

"Too many people ... have a portfolio that has no rhyme or reason, and their asset allocation was basically determined by individual security selection instead of the other way around," Johnson said. "You should make the decision to invest, you should decide what assets you'll invest in, and then you decide what to buy. That's the top-down approach."

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