Need a little help figuring out what a particular fund may invest in? Lane recommends using Morningstar.com's Style Box to analyze funds.

The Style Box is a nine-block grid designed to classify and aid in the evaluation of stock and bond funds. With a stock fund, for example, the vertical axis of the grid indicates the overall market capitalization of the fund, spanning from large companies at the top of the grid to small companies at the bottom. The horizontal axis of the grid shows the range of investment styles, from value at left to growth at right, and "blend" in the middle.

As an example, the Vanguard 500 Index Fund, which mimics the Standard & Poor's 500 index, is a large-company fund containing fast-growing companies as well as mature companies that may pay a dividend. The grid of the fund's Style Box is shaded across the top, indicating it's a large-cap blend fund that holds value and growth companies.

Trying to choose an investment fund without understanding these basics can lead to trouble.

"Folks will chase performance and pick the fund that did the best, but they might not be comparing apples to apples," Lane says. "They might be moving out of a small-cap into a large-cap fund, or vice versa."