I would be inclined to have a substantial portion of assets in income producing holdings, investments which, as a group, tend not to fall as much as stocks in most situations that spook the markets and which, even if they fall in price, likely will go on providing a good stream of dividend revenue.
My personal preference is to have about a third of liquid assets in non-equities that provide a good yield. Others may differ about the best percentage, but few would argue with the wisdom of such holdings once a bear market in stocks or stock mutual funds has begun in earnest. The trick, then, is to have them ahead of time, so they can provide regular payments through the investment lean times and available assets that can be redeemed for the purchase of stocks at their then lower, bargain price levels.
Income instruments are not my forte, but I have been impressed with the record and wisdom of "Forbes" fixed-income columnist, Richard Lehmann, who, in the magazine's 12/25/06 issue, has provided on its free online site the following suggested portfolio of such securities for the year ahead: "A Balanced Portfolio for 2007 - Forbes.com." He feels it should do well in most economic contingencies while providing a yield of 9.3%, if assets are allocated as he recommends.
For the equity side of one's nest egg, I have found six no load mutual funds which, taken together, have had significantly lower risk of permanent loss than the benchmark S&P 500 Index and yet offered a better overall performance. Based on info through 12/15/06, all six are no load funds (though some have small redemption fees if sold in less than six months) and are still open to new investors. Their ticker symbols, toll free numbers, and long-term records are provided in the table below. The average of their annualized performances over the last 10 years (or since inception [on 9/3/97] in the case of CGM Focus) was approximately 14%. The S&P 500 Index's annual performance in that period was only about 8%, and the index was more volatile.