Last year was the worst in a bear market now three years old.

Ever since equity fund investing stopped being easy three years ago, investors have been in a mad scramble to find safe havens. But in 2002, that game ended.

There was virtually no where to go.

Sure, precious metals investors made a killing last year, with average gains of 58%, according to Morningstar. And real estate funds managed an average gain of 4%. But these were tiny islets in an ocean of sinking ships-amounting to merely $19 billion out of trillions in fund investments. So chances are, if you invested in equities in 2002, you lost. When the year was done, and the dust cleared, only 3.5% of U.S. stock funds finished in the black according to Lipper, the research arm of Reuters.

Style didn't matter a whole lot in 2002. Whether it was value, growth, blend or whatever, the performance was negative. The primary differentiating factor was by how much.

It was the worst beating investors have taken since 1974, in a year that marked the third consecutive down year for the overall equity market. U.S. stock fund investors saw their assets deteriorate by an average of 20.84% in 2002, according to Lipper. The Standard & Poor's 500 was down 22.23% for the year, and the Russell 2000 down 10.59%.

Even more unbelievable: If not for a fourth-quarter rally, it actually would have been worse. "It really met the classic definition of a bear market, where there's no where to hide and everyone gives up," says Russ Kinnel, director of fund analysis at Morningstar. "The losses are big enough that I think we'll need a sustained rally to get people back. But even with that, I can't imagine people will be as enthusiastic as they were in the late '90s."

However, as dire as the post mortem on 2002 seems, there is reason to be hopeful, according to market watchers. As in the previous two years, the experts note that bear markets eventually come to an end-with the only unknown being exactly when. So, while some advisors may be tempted to bulk up on bond funds-which provided investors with average gains of 6% last year-the experts caution that to do so could mean missing out on an eventual comeback in equities. Stock prices are low, they note, which means it's a ripe buying environment for patient investors, while a 20-year secular bull market in bonds looks like it's nearing an end of its own, three years after a similar run for stocks ended.

Those embracing a more positive outlook say 2002 was a good year in that it melted away more of the fat that bulked up values during the late 1990s. "It takes a while to unwind that speculation-to get it out of the system," Kinnel says. "This is a decent time to be investing. ... The market is reasonably valued, and if you've got savvy stock pickers who are long-term focused, I think you'll do well."

Some of the more successful fund managers of 2002 will heartily agree that there are pockets of value and growth in today's market. At the six-year-old FBR Small Cap Value Fund, manager Charles T. Akre Jr. says that these are among the toughest times he's seen in over 30 years in the investment business. He sees the market as still suffering from the inflated valuations of the bull market-a problem he feels has been compounded by the slow economic recovery.

Yet he feels this is as good a time as any to be a value manager on the lookout for equities selling at a bargain. "Remember, at the end of the day, whenever that is, all businesses have some real value regardless of what investors think," Akre says. "Investors some days think they're valued much greater than they are, and some days think they're much worse than they are. Our job is to be discerning enough to buy when companies are selling below their real value."