Here's a scary thought: What if after one of the worst market meltdowns in history, spurred by overleveraging in the housing market, debt-fueled bank expansions and bad bets on risky investments, no one really learned anything? What if the seeds of last year's market crisis are actually growing taller than before?

Robert Arnott, chairman and founder of Research Affiliates in Newport Beach, Calif., believes that investors are in fact getting ahead of themselves. "I think the collective amnesia is pretty alarming. I think the crisis has not passed," he says. "I think the risk of a major European bank going down is greater than ever. The risk of commercial real estate imploding the same way residential imploded is a real risk. And the aggregate debt levels are too high and unsustainable."

Got all that? Wait, there's more.

"There is a lot of complacency," Arnott continues. "There are a lot of investors thinking we're back to a 'buy-the-dips' market. A lot of investors I think have taken the last year-and-a-half experience and kind of cleansed their minds of it."

Arnott and his team at Research Affiliates calls this collective amnesia the "Rip Van Winkle Effect," pointing out that an investor who slept through the last two years would think there had just been a minor market drop. The investor would not be aware that what actually happened was a major crash, followed by "the mother of all recoveries," as Arnott calls it. The data backs up his assessment: The Dow Jones Index finished 2008 down 35%, while the S&P 500 and Nasdaq were off nearly 40%. For the year-to-date, as of the first week in November, the Dow is up 11.3%, the S&P 500 has gained 15.7% and Nasdaq has risen a whopping 30.5%. All of the major indexes have been up over 50% since their March lows.

"The recovery since March has been quite breathtaking," Arnott says. "That sets people's minds at ease, but people forget that it's a liquidity-driven bull market. When we have a massive fiscal stimulus and a massive monetary stimulus and people don't want to spend, where is the money going to go?"

It's going to go back into the markets. Which is not, truth be told, bad news. Financial advisors, after all, want to see their clients put their money back to work. What the market crisis has taught us is not that people shouldn't be investing—your money isn't gaining value stuffed inside your mattress—it's that they should re-examine how and where they are investing. The old style of investing-primarily domestic, primarily a 60/40 split on stocks and bonds, and a buy-the-dips approach to stock-picking—has to be updated. For some, this will mean altering their asset allocation strategies. Others will stay the course. But even after one of the worst global market crashes in history, the rules for investing aren't necessarily new rules, just old rules rethought for a new world.

The good news is that the scorched-earth mentality that permeated the investing world last year has almost completely disappeared. The market rally has given investors their confidence back, although like Arnott, some believe investors are becoming a bit too confident. Despite the upward momentum the market has experienced since last March, there are still lessons to be taken away from the darkest days of the market crash. Some of these were learned the hard way.

LESSON 1: THERE ARE NO ABSOLUTES

"I think people now realize that housing is still a market, and equities don't always go up," says Don Quigley, portfolio manager of the Artio Total Return Bond Fund. As with any other market, he explains, housing is volatile. Quigley says that people developed "a sense of entitlement" about their home equity, believing that it was always going to appreciate and therefore they didn't need to save and invest their money. A June report from the MetLife Mature Market Institute found that 35% of older Americans still see their homes as collateral for a loan. About 14% of these people are taking cash out of their house through a home equity loan or reverse mortgage.

Quigley also admonishes investors who have gone from swearing off equities and taking all of their money out of the market during the crash, to now believing once again that equities are always going to go up because of the tremendous rally.

"I don't think there's any reaching those people," he says.

LESSON 2: REVISIT CORRELATIONS

So instead of moving all of your money into cash or betting all of it on stocks, what is a prudent approach for an investor? Broad diversification across asset classes, naturally. If that sounds like Investing 101, well, it is. But when the market began spiraling out of control, a version of this headline began cropping up everywhere: "Is Diversification Dead?" The short answer is no. But let's take a quick step back. Arnott reminds investors not to rely on low historical correlations to apply in a market crisis.

Instead of investing in stocks during the market downturn, Research Affiliates invested in assets that normally move opposite to stocks. This meant buying assets like commodities, high-yield bonds, emerging-market debt and convertibles. Of course all of these crashed just as hard as stocks even though they are normally less volatile.

"The thing that shocked me last fall was not the market crash, but the rise in correlations-the fact that normally diversifying markets crashed too," Arnott says.

From research provided by Brinton Eaton Wealth Advisors in Madison, N.J., one can look at two asset classes-equities and commodities-to get an understanding of how drastically correlation rose during the market crisis. The oldest of the popular commodity indexes is the Goldman Sachs Commodity Index, which has existed since February 1970. The S&P 500 Stock Index has been published since 1957. Through August 2008, there were 463 uninterrupted months over which these two indexes coexisted. Over those 463 months, both indexes had material (5% or more) declines in the same month a total of three times, with one being on 9/11. In the six months beginning September 2008, it happened five times. What was once an extremely rare event with a frequency of less than two-thirds of 1%, occurred with a recent frequency of 83%.