IF YOU ARE NOT PARTICPATING IN THIS BULL MARKET YOU'RE NOT ALONE

Maggie Pearson, a Lake Worth, Florida homemaker has big regrets about not having money in the stock market. After all, she had invested in a stock fund in the early 1980's and was very pleased with the way her fund shares were growing.

Unfortunately, life got in the way and Pearson had to sell all of those shares when her family was strapped for money and needed it.

"I'm kicking myself that we don't have any money in the market," says the 45-year old mother of two sons.

So Pearson, like millions of other wish-I-were investors, has watched as the industrials have advanced some 13-fold since 1982 wishing they still owned those fund shares.

Talk with behavioral finance folks about Pearson and you'll learn that regret often plays a big part when it comes to psychology and investing. According to the pros, those "if only's" are governed by something called "counterfactuals".

"Counterfactuals are things that didn't happen that you can imagine might have happened," says Terrance Odean, professor of finance at The Graduate School of Management at the University of California, Davis Campus.

These counterfactuals go hand-in-hand with any changes we might make in our patterns. "If you changed your pattern and things don't work out to your benefit, you have more regret than if you stuck with the usual," he says.For example, say you began investing monthly in stocks and fund shares at the start of 1998, with the intention of being a long-term investor. But last fall, after the market fell some 20 percent, you sold everything. Today, you may be kicking yourself for not sticking it out---and using the downturn as buying opportunity. Or, sticking with your original plan.

What investment lessons can investors glean from such experiences?

• Have a specific dollar goal in mind with every fund investment you make. Pearson, as it turns out, was investing in funds "to make money". She didn't have a well-defined reason for investing---such as the down payment of a house, or a new car. Knowing precisely what you are investing for gives purpose to the task and keeps you focused. Although a goal might not have prevented Pearson from selling the fund shares when her family needed the money, it may have encouraged her to invest again once money was available, with the same, or a new, goal in mind.

• Follow-through: If you've got an investment plan keep working it. One simple way for fund investors with not a lot of cash on hand to participate in the market is via monthly investment programs. The Berger Funds,(800-333-1001), for example, have just introduced a $100 a month monthly investment program available on all their funds.

• It's more important than ever to know exactly the types of companies your fund is investing in and that the fund's investment objectives are in line with yours.

Odean says that there is always risk in investing and that people would be best served if they put their emotions aside and make sound long-term investment decisions that aren't based on factors like regret or lost opportunities but on facts and data. With the market at the levels it is today, he says, "It shouldn't matter so much what level the market is at. What's more important is to assess whether or not you think the investment is a sound one."