LISTENING TO YOUR GUTS TODAY CAN PAY OFF TOMORROW

With the average stock fund down about 25 percent over the past 52 weeks -- and about 17 percent year-to-date-- according to Lipper, you'd think investors would be in a bargain-buying mode. But they're not.

Kathleen Gurney, Ph.D., is a pioneer in the field of financial psychology and founder of financialpsychology.com . According to research conducted on her web site, more than half of the people interviewed are confused about what to do next about their investments. Most are doing nothing and holding on to their current positions.

I spoke with Gurney to find out why investors aren't more like shoppers and partaking in the market's current big sale. Here's what she had to say:

Q: Why do you think people will rush to a store that's closing or has a big sale going on, and spend money there but won't go to the market for bargains when prices are considerably lower than they were a year ago?

Gurney: With a sale you know where the price started. And, you know what percent that you're getting off. So people know where the bottom is. Or, they think they know.

They also feel that if they don't buy this on-sale item now, it may not be there if they were to come back in a week or two.

With a stock, and in the market today, they don't know where the bottom is or where it is going to be. And, every day there seems to be another sale.

But the key difference is, when bargain shopping there isn't the fright that you are going to be losing your money, or, not have something for money spent. At least with a sale, you've got your blouse or an item that is tangible that you can walk away with, touch and feel.

Q: Plus you can brag about the price you paid for it, too.

Gurney: Exactly. People can say, oh I got this at 50 percent off, or whatever the reduction is, and feel smart.

But if they buy a stock and tomorrow realize that they could have purchased it even lower, their stupidity becomes obvious. They feel regret. They feel remorse. They feel shame. They ask themselves why were they so stupid, and tell themselves that they should have known the stock would fall even further.

All of those things are stoppers. They get in the way of investing because they are afraid that per share prices will go lower.

The problem with investing now, in a down market as opposed to a bull market where people think prices are only going to go up, is that people don't know where the bottom of the market is. They are waiting for some sense of where that bottom is going to be. And, they are listening to the experts and hearing a lot of mixed messages. Those mixed messages, combined with the market's volatility means additional anxiety and stress. All of which means investment decisions are a lot more difficult to make.

Q: If fear, regret and a sense of not knowing what's ahead is keeping people away from investing in a down market, what advice do you have for investors going forward?

Gurney: Know how much you can emotionally afford to loose. Really confront that, understand it, then use that information to function accordingly in the future. And, be better to yourself.

If you know that you're someone who really suffers and dispares with extended market downturns, learn from that. So many people don't want to look at themselves and ignore and deny their feelings. And that's the worst thing they can do because they'll only make the same mistakes again.

We are creatures of habit so make sure that you use what you've learned from this market experience to make some real constructive changes for the future. Think of your well being as financial and emotional and take both into consideration when you're investing because there is definitely an emotional component to investing that people ignore. It's not just money; it's your guts and your money. And, you have to respect that.