Seven Pillars of Asset Allocation Wisdom

However, buyers beware: Funds don't always live up to their name. As a study from Ibbotson found: "Many mutual funds' stated objective can be vastly different from their estimated style breakdown." The Ibbotson paper pointed to a "small-cap" fund that actually held 35% large-cap stocks.

A fund that deviates from its name doesn't mean it should be avoided -- the long-term winner (LMVTX Quote)Legg Mason Value Trust, for instance, takes a more aggressive approach that makes it more of a blend of value and growth. Asset allocation-minded investors just need to know what they are buying. Any mutual fund worth its salt will provide a fairly detailed analysis of its style and its holdings on its Web site.

5. Lose Your Overweight

The most common mistake financial planners find in investors' portfolios today remains too much exposure to large-cap companies -- and large-cap growth and technology companies, in particular.

"If you've been frozen with fear, and you're stuck in tech and large-cap growth names, the first thing you should do is reallocate," O'Shaughnessy said.

The second-most common mistake might be overweighting long-term bonds right now, O'Shaughnessy and others say.

A historical examination of returns in a variety of classes is a study in reversion to the mean. Generally speaking, whenever one group has a run of outperformance, it reverts back to historical norms. Right now, large-cap growth stocks and long-term bonds are in the process of coming back to earth. Typically, it takes years. That doesn't necessarily mean that large-cap growth stocks will post negative returns for the next five years -- or that you should get out of them completely. It means that you should at least get back to a normal weighting -- perhaps even lighten up a bit.

Conversely, small-cap and large-value stocks in general look poised to continue reverting to historical means, which means they will outperform. Many investors -- still sporting the same 1999 portfolio -- need to beef up their small-cap and large-value holdings, as well as foreign holdings.