Regrettably, it can also increase the size of your losses when markets tumble.

Looking back over the past 15 years, one of the best times for share investors to borrow money and invest it for the long term was around the end of 1987 and through most of 1988.

But the gloom and doom prevailing at the time meant a lot of people some of them professional investors thought about it, talked about it but didn't do it.

Fear of losing money, understandably, triggers a powerful paralysis among investors. So the question is, how can the head overrule the heart at times like these?

Diversifying your portfolio across property, shares or fixed interest goes a long way to lowering risk and by investing steadily over long periods of time you get diversification across times when a market may be running hot, when it is cooler and even when it is caught in the middle of a perfect storm.

For people investing with a long-term goal in mind retirement for example a modest amount of gearing is sensible and, just like our mortgage payments, it has the added advantage of being an enforced savings plan.

Taking out a margin loan is the traditional way to gear into the sharemarket and in recent years more people have been drawing down the equity in their home.

But a relatively new type of managed fund offers another avenue, one without the threat of a margin call or the risk of seeing your mortgage balloon out as your investments fall.

Colonial First State launched the first geared share fund in 1997. People who invested early, let's say $10,000 in 1998, now would have about $24,000 in theiraccount.

That's an 11.2 per cent return over five years compared with the index return of 4.8pc. So the gearing factor worked to accelerate the gains. But in the 12 months to September the fund has fallen, so the multiplier effect has worked on the way down as well.

The new Advance geared fund invests in the Advance Sharemarket Fund that is managed by Maple-Brown Abbott, one of Australia's most successful and independent fund managers over the past 15 years.

Geared funds should also deliver tax-effective returns because they pick up franked dividends from the companies in which they invest.

Maple-Brown Abbott's approach is for low portfolio turnover, which again helps the tax effectiveness of the return because the fund's profits are capital gains on stocks held for more than 12 months so they enjoy lower capital gains tax rates.

For people with DIY super funds, that can deliver a very tax-effective return and providea legitimate solution to the restrictions on DIY super funds that prohibit them from borrowing money.

No-one knows if this is 1987 or 1988 revisited, whether markets have bottomed or have further to fall.

For long-term investors that type of market timing question is almost irrelevant.

Perhaps the real question is what is guiding your investment decisions the head or the heart?

Robin Bowerman is editor of Personal Investor magazine.

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