When Enron’s accounting fraud came to light and the company went bankrupt, Enron employees not only lost their jobs, they lost an estimated $850 million on the Enron stock held in their retirement accounts.

Bear Sterns and Lehman Brothers also encouraged their employees to hold stock in their companies. That turned out to be patently bad advice, and not just because the companies crumbled during the credit crisis.

It’s generally bad diversification advice. It would have been just as bad for employees of Berkshire Hathaway or Apple.

Diversifying your portfolio can both boost your gains and minimize your risk. But taking too narrow a view of your investments can lead to three common and costly mistakes.

Sometimes even the pros get it wrong. But these mistakes are easy to avoid, once you understand the true nature of your portfolio.

All Your Eggs in the Company Basket
Fidelity Investment maven Peter Lynch coined the adage, “Invest in what you know.” Although people know and understand the companies they work for, they need to draw the line when it comes to investing where they work. After all, they already have a significant investment in the company.

When you look at your portfolio, you need to look at all your assets, not just the stocks and bonds in your brokerage account. You are an asset, too. In economic parlance, you are “human capital.” When you work for a company, you are, in effect, investing your capital with them. Once you count your salary and benefits in you portfolio holdings, you’ll likely discover you are already “overweight” in your company.

Don’t You Already Own Real Estate?
The Dow Jones Composite REIT Index is down -51.5% since January 2007. Not surprisingly, home values have also dropped since 2007. The median price of a home is now $174,100, down -36.0% from its 2007 level of $271,900. Were you one of the many investors that took a double-hit on real estate?

There are a number of studies that illustrate the diversifying powers of real estate. Ibbotson Associates has shown that when real estate investment trusts or “REITs” for short were added to a portfolio of stocks, bonds and Treasury bills, overall portfolio returns increased while risk decreased.

But if you own a home, as 67.4% of Americans do, you already have a boatload of exposure to the real estate market. A home represents about a third of a typical individual’s net worth. What’s more, about two-thirds of homeowners have a mortgage, which means the investment in their home, and therefore real estate, is leveraged. While residential real estate doesn’t correlate one-for-one with commercial real estate, it would be hard to build a case for homeowners adding exposure to the sector.

Rebalance When it Counts
By design, a well-diversified portfolio doesn’t stay that way. Some assets will outperform and do your portfolio’s heavy lifting while others rest. In time, you’ll be overweight in those assets that have had a nice run. And unfortunately when it’s their turn to rest, these positions will create a big drag on your results.

Rebalancing a portfolio isn’t as exciting as researching a new opportunity. Most investors treat rebalancing like a painful chore, relegated to a New Year’s resolution list. While an annual rebalancing is good, rebalancing after a rally or a correction is far better.

That’s because these are precisely the times when your imbalances are the most pronounced and pose the most risk. But the added advantage of rebalancing during peaks and troughs is that it will actually force you to “buy low and sell high.”

Since March, the S&P 500 has had a nice rally — up more than +40%. And in that time, there have been some noteworthy outperformers and surprising underperformers. Commodities have a well-deserved place in a diversified portfolio. But if you were invested in copper, commodities may now be taking up more space in your portfolio than you realize. For instance, Southern Copper (NYSE: PCU) is up nearly +120% since March.

You may discover that after this rally, you are now underweight in some traditionally stable performers. Recession-resistant sectors like grocery stores, utilities, and telecoms lagged the overall market this year. Many telecom companies, especially wireless providers, have been adding subscribers and maintaining a steady stream of revenues and cash flow throughout the recession. Consumer staples and essential services may not be the sexiest investments in the market. But they can reduce the overall risk in your portfolio and even become the heavy lifters in an environment where consumers are still cautious.

The Time is Now
Do yourself a favor this year. Don’t wait until January 1 to think about rebalancing your portfolio. Get rid of your employer’s stock and look at your real-estate positions with a critical eye. Put your overweight positions on a diet and feed the rest.

It won’t take as much work as you think to get yourself ready for the next market cycle.