Among its many effects, the current bear market has made a lot of people feel like fools.

Among them are young and mid-life folks who invested their savings for a house down payment in the stock market, only to find themselves farther from home ownership instead of closer to it.

Also among them are people who retired within the past few years after they "learned" in the 1990s that successful investing was one of the easiest things they ever did. They put the bulk of their retirement funds into technology and telecommunications stocks and funds.

Now, some of these investors are wondering if they need to resume working -- just when the economy is languishing and jobs are scarce.

Some working investors who are trying to save for retirement are also feeling like fools. One of them is Eric, a 29-year-old marketing specialist, who sent me an email two weeks ago: "I'm putting $800 a month into my 401(k) plan, just as I'm supposed to do. But I feel like a fool, as I keep losing more and more of this money. Should I just keep doing this and try to forget about the losses? Should I put all my new money in cash? Or should I use market timing?"

Eric has only limited choices in his 401(k) plan, but he's using several excellent funds: Fidelity Magellan (FMAGX: news, chart, profile) for U.S. large-cap stocks, Fidelity Low Price Stock (FLPSX: news, chart, profile) for U.S. small-cap value stocks and Fidelity Diversified International (FDIVX: news, chart, profile) for international large-cap stocks.

The first of Eric's three proposed solutions follows the conventional wisdom to stay the course -- and it might be a smart thing to do. But I'm always nervous about suggesting that people ignore the results of their behavior.

Eric would definitely not be wise to adopt his second proposed solution, parking new contributions in cash. This implies that he'll somehow know when to resume investing in equities, and my experience tells me that won't happen until stock prices are considerably higher than they are now. In the meantime he will have lost an important moneymaking opportunity.

However, Eric's third proposal is worth considering. He clearly needs to invest in equities for the long term, but the bear market is making his investments counter-productive in the short term. Timing, if done right, could allow him to keep his money in equities and to sleep better at night.

There's a simple timing system that anybody with a computer can easily implement. It doesn't require analysis, estimates, forecasts or guesswork of any kind. This system is purely mechanical, and it's guaranteed to reduce the risk of being in the market because it switches money between a mutual fund and a money-market fund. Every day that money is in cash, it's not exposed to the risk of the market.

The system is called a 100-day moving average, and it's easy to calculate. It can be applied to any stock fund, though it will be more effective with more volatile funds. Here's how to apply it:

Plot the daily closing prices of whatever fund is being used for the most recent 100 days. If you can't get historical data, start with yesterday's close and start recording each day's price, preferably in a computer spreadsheet.

When you've got 100 days of data, find the average of all those prices. Then re-calculate it every day, replacing the oldest price with the newest one. Because it will change daily, it's called a moving average.

Every day, compare the current price to the average. If the fund price is above the average, you should be invested in it. If the fund price is below the average, have your money in cash. This may seem counter-intuitive, but that is the way it works.

Using historical data, we applied this simple system to the Nasdaq (the composite index until 1990 and the Nasdaq 100 since then), a volatile asset class from 1972 through September 2002.

Without timing, a $100 investment in the Nasdaq in 1972 would have grown to about $1,700, for an annualized return of 9.7 percent. Timed with the 100-day moving average, the same $100 investment would have grown to about $16,000, for an annualized return of 18 percent.

Timing also reduced risk. Without timing, the worst 12 consecutive months of the Nasdaq was a loss of 67.3 percent. With timing, the worst 12-month period was a loss of 30.7 percent.

If Eric wants to be a savvy investor, he'll beware of expecting such good results without some strings attached. The strings attached to market timing are discipline and emotional challenges. Before he embraces timing, Eric should understand at least a few things about it.

The most important thing investors should know about market timing is that it is not perfect. It does not attempt to identify the precise peaks and valleys of market cycles. If it can capture the big swings in direction, it can do its job.

Timing requires at least as much faith and patience as buying-and-holding, because the majority of trading signals generated by a mechanical timing system turn out to be, in retrospect, the wrong thing to do. But over the long term, timing can be very effective.

In bear markets, many investors find timing easy to accept because it gets them onto the sidelines, increasing their comfort. But in bull markets, timing may continue to generate "sell" signals. This can be very frustrating, because this is just the time that many investors think they should remain fully invested. In any market, bull or bear, the results of timing are unlikely to closely resemble the results of a buy-and-hold strategy.

Timing requires a daily discipline to make the calculations and (more important) make the trades. This is more difficult emotionally than it might seem, because timing requires investors to buy when others are selling and to sell when others are buying.

Though that can be very uncomfortable, it's what most investors believe they should do: Buy low and sell high. And for those who can keep the faith and maintain the discipline, timing can pay off.