Get ready for the next big thrill: smooth out your ride in the market by knowing your tolerance...

[ILLUSTRATION OMITTED]

NO RISK, NO REWARD. IT'S A PLAIN-spoken maxim that Richard Marshall Jr. lives by. The U.S. Navy commander, who currently lives in Alexandria, Virginia, and works at the Pentagon, invests in mutual funds and seeks to supercharge his holdings.

His personal

situation allows him to take some risks. He's single and without major financial pressures. He doesn't have to worry about house or car payments eating into his cash flow. A naval officer since 1991, he's within sight of 20 years of service, which will entitle him to a lifelong pension. Moreover, Joe E. Outlaw, president of San Diego-based PenTrust Financial Services and Marshall's financial planner, says that "Richard has the kind of personality that allows him to sleep at night, even if the market is down. He knows he's in for the long term."

Marshall has followed Outlaw's suggestion that he reduce his exposure to domestic stock funds, real estate funds, and bond funds. "My portfolio now includes 55% in international funds and 25% in global funds," Marshall says. (Global funds invest in U.S. and foreign companies while international funds focus solely on offshore stocks.)

He's decided not to sit on the sideline because of market turbulence. But a number of investors have become increasingly cautious due to economic uncertainty. With consumer prices up 4.1% in 2007, inflation was pushed up by the largest amount in 17 years. Now the prospect of recession looms as inflation threatens to rise even further. Oil prices spike as the value of the dollar slides. Housing prices continue to plummet as mortgage defaults increase. Investors witnessed a sharp downturn in the stock market in the first weeks of this year--the S&P 500 declined 6.1% in January alone.

There's every indication that the market in the coming months will prove to be even more tumultuous. For instance, the Chicago Board Options Exchange's Volatility Index, which measures market swings, roughly doubled from early 2007 to early 2008. For instance, in a mere three months, from October 2007 to January 2008, the Dow dropped by 14.5%. If you were sitting on a $200,000 nest egg last October, one that moved in sync with the Dow, you'd suddenly be facing the future with only $171,000 to tap.

These factors led Marshall, 39, to tilt his portfolio sharply to non-U.S, holdings. In fact, his largest position is now in Oppenheimer Developing Markets Fund (ODMAX), which is classified as an emerging markets fund. Such vehicles are considered among the riskiest of all stock funds because they invest in countries that may have light stock market regulation, political turmoil, hyperinflation, and currency devaluations.

For taking such chances, investors may be well rewarded. That turned out to be the case for Marshall, who saw his fired, which invests heavily in Brazilian and Indian equities, return nearly 34% in 2007. "My other international and global stocks also did well," he says. To achieve his lofty returns for his portfolio--which is worth $200,000--the top gun doesn't own a single bond fund and only 5% of his holdings is in cash.

Marshall was willing to pursue aggressive strategies to realize sizable returns. But that doesn't mean you should approach investing the same way. To evaluate where you stand, follow market activity closely, determine your risk tolerance level, and seek solid financial advice. BLACK ENTERPRISE has also developed The Moneywise 100--our semiannual guide to 100 mutual funds that merit your attention. Working with Chicago-based mutual fund research firm Morningstar, we've identified funds based on criteria including three-and five-year returns in the top quartile of their respective categories and, for the first time, indicated risk ratings for each.

MORE VOLATILITY

Even though recent events have reminded many that investing can be a risky business, the outlook is not entirely gloomy. The stock market has had many corrections and crashes over the years, yet investors who tolerated the downs have enjoyed the ups: Long term, stocks have delivered much higher returns than bonds or bank accounts. For a quarter of a century--from late 1982 to 2007--economic historians maintain that the stock market has produced a total return of more than 2,000%.

In fact, last year turned out to be a good time to take certain types of risks. International stock funds returned nearly 16%, on average, while domestic stock funds gained about 6%. Among foreign stock funds, the leaders were specialized categories such as Latin America (up 46%), Pacific/Asia, excluding Japan (48%), and diversified emerging markets (37%). Japanese stock funds, on the other hand, lost more than 9%. The narrower a fund's focus, the more risk investors assume.

Sector funds also demonstrated this risk-reward tradeoff. Top performers included those with holdings in natural resources (37%), precious metals (23%), and utilities (20%), while investors were punished if they held funds specializing in financial firms (-12%) or real estate (-15%).

TEST YOUR TOLERANCE

These days many investors are seeking the safety of money market funds. "There are three main reasons for investing in a money market fund," says Dail St. Claire, president of New York-based Williams Capital Management Trust. "They are preservation of capital, liquidity, and generating income."

In today's environment, the first two are far more important, according to St. Claire. That is, protecting against loss and having access to your money should be prime concerns, rather than seeking an extra quarter-point of yield.

"Do your homework," St. Claire says. "Before investing in a money market fund, read the prospectus as well as statement of additional information, or SAI, and the one-page fact sheet. See if the fund is identified as a '2a7' fund. Those funds are subject to federal regulations on portfolio maturity, credit quality, diversification, and liquidity."

Overall, putting together a mutual fund portfolio that matches your risk threshold can prove challenging. First, determine how much market turbulence you can stomach. You can take a risk tolerance quiz online at BlackEnterprise.com. "If you work with a financial adviser, you should go through this kind of exercise before making any investments," says Outlaw.

FIND THE RIGHT MIX OF FUNDS

Experts say most investors have moderate or slightly lower-than-moderate risk tolerance levels. Once you have some idea of whether you are Bold Bart or Nervous Nellie, you can begin the process of constructing your mutual fired portfolio. David Kathman, a fund analyst at Morningstar, says you should first determine the risk of various fund categories.

"Risk is often equated with volatility," says Kathman, "and the most common way to measure the volatility of an investment is standard deviation." In essence, standard deviation reflects historic swings in investment returns. The wider the swings, the greater the risk investors will face. So, historically, a large blend fund--a mix of large-company growth and value stocks--would provide far less risk than specialty funds, such as those that invest in precious metals. During the past five years, however, precious metals funds returned nearly 22% a year on average, twice as much as large blend funds. Therefore, risk-takers were rewarded.

A more audacious investor, then, might start off with a core holding of large-company domestic and international stock funds. Smaller-company funds, specialized sector funds, and emerging markets funds could be added, in search of higher returns. Fixed-income investments would be virtually nonexistent in his or her portfolio.

What about investors with very little taste for risk? "I'd recommend a large allocation to bond funds," says Outlaw. All fixed-income investments--including those that hold low-rated junk bonds--tend to provide more safety than any stock fund category.

[ILLUSTRATION OMITTED]

Once you've decided on your mix of fund categories, the next step is to pick funds within each class. Always focus on past performance, expense ratios, asset turnover ratios, and the tenure of fund managers, among other key elements. Another risk gauge: five- or 10-year returns.

Morningstar's Kathman also suggests taking a critical view of portfolio diversification. For instance, a fund with 30 holdings might prove to be more volatile than a vehicle with 50 stocks.

One way to size up the best funds is to review our Moneywise 100 listing; we have taken into account all of the aforementioned factors. As a rule, however, evaluate risk for yourself before investing a single dollar to determine if a fund will provide the ups and downs of a rollercoaster ride or keep you on solid ground.

The Moneywise 100

                       Ticker   5-year   5-Year        Expense
Fund Name              Symbol   Return   Risk Rating   Ratio

Large Growth

Columbia Marsico       NMYAX    21.7%    Above Avg     1.01%
  21st Century Z
Amana Trust Growth     AMAGX    19.7     Average       1.35
American Funds New     ANFFX    15.9     Above Avg     0.76
  Economy F
American Funds         GFAFX    15.0     Below Avg     0.61
  Growth Fund of
  Amer F
Transamerica Premier   TEQUX    14.9     Average       1.15
  Equity Inv
Jennison Blend Z       PEQZX    14.7     Average       0.64
AIM Summit P           SMMIX    14.7     Average       0.92
Excelsior Large Cap    UMLGX    14.5     Above Avg     1.20
  Growth
Waddell & Reed Adv     WAVYX    13.9     Above Avg     0.86
  Vanguard Y
Sit Large Cap Growth   SNIGX    13.4     Low           1.00

Large Value

RiverSource            IDQYX    19.2     High          0.89
  Diversified Equity
  Inc R4
Excelsior Value &      UMBIX    18.7     High          1.05
  Restructuring
1st Source Monogram    FMIEX    17.2     Above Avg     1.15
  Income Equity
American Beacon Lg     AAGAX    16.9     Average       0.32
  Cap Value AMR
Monteagle Value        MVRGX    16.4     High          1.22
RiverSource Equity     AEVYX    16.3     Above Avg     0.93
  Value R4
DFA Tax-Managed U.S.   DFMVX    16.2     High          0.24
  Marketwide Value
  II
Seligman Large Cap     SLVIX    16.0     Above Avg     0.97
  Value 1
Vanguard Value Index   VIVAX    14.5     Average       0.21
MFS Value I            MEIIX    14.5     Low           0.76

Large Blend

Janus Contrarian       JSVAX    26.7     High          0.94
Fairholme              FAIRX    18.8     Above Avg     1.00
Neuberger Berman       NPRTX    17.4     High          0.80
  Partners Inv
American Funds-        AFIFX    17.3     Above Avg     0.58
  Fundamental Invs F
FMI Large Cap          FMIHX    15.5     Low           1.00

Mid-Cap Growth

BlackRock U.S.         BMCSX    21.4     Average       1.40
  Opportunities Svc
Roosevelt Anti-        BULLX    18.3     Low           1.28
  Terror Multi-Cap
Dreyfus Premier S&P    DSORX    18.2     Average       1.15
  Stars Opp I
Neuberger Berman Mid   NMANX    16.9     Above Avg     1.02
  Cap Growth Inv
Sit Mid Cap Growth     NBNGX    16.8     Average       1.15

Mid-Cap Value

RiverSource Mid Cap    RMCVX    22.2     Above Avg     1.10
  Value R4
Columbia Mid Cap       NAMAX    18.1     Average       0.87
  Value Z
Allegiant Mid Cap      ARVIX    17.6     Average       0.93
  Value I
Delafield              DEFIX    17.5     Above Avg     1.32
Heartland Select       HRSVX   16.6      Above Avg     1.25
  Value

Small-Cap Growth

Winslow Green Growth   WGGFX    24.5     High          1.45
Excelsior Small Cap    UMLCX    18.6     Average       1.22
BlackRock Small Cap    PCGEX    18.3     Average       1.02
  Grth Equity Svc
TCW Small Cap          TGSCX    16.7     Above Avg     1.29
  Growth I

Small-Cap Value

Columbia Small Cap     NSVAX    17.3     Average       1.02
  Value II Z
Columbia Small Cap     CSCZX    16.0     Average       1.04
  Value I Z
Franklin Small Cap     FVFRX    15.9     Average       1.40
  Value R
JHT Small Company      N/A      15.4     Below Avg     1.08
  Value Trust Ser I

Diversified Emerging Markets

DFA Emerging Markets   DFEVX    46.0     Above Avg     0.60
  Value I
Fidelity Emerging      FEMKX    35.1     Above Avg     1.01
  Markets
T. Rowe Price          PRMSX    34.8     Above Avg     1.25
  Emerging Markets
  Stock

                       Minimum
                       Initial
Fund Name              Investment   Website

Large Growth

Columbia Marsico           $0       www.columbiafunds.com
  21st Century Z
Amana Trust Growth        250       www.amanafunds.com
American Funds New        250       www.americanfunds.com
  Economy F
American Funds            250       www.americanfunds.com
  Growth Fund of
  Amer F
Transamerica Premier    1,000       www.transamerica.com
  Equity Inv
Jennison Blend Z            0       www.jennisondryden.com
AIM Summit P                0       www.aiminvestments.com
Excelsior Large Cap     2,500       www.excelsiorfunds.com
  Growth
Waddell & Reed Adv          0       www.waddell.com
  Vanguard Y
Sit Large Cap Growth    5,000       www.sitfunds.com

Large Value

RiverSource             2,000       www.riversource.com
  Diversified Equity
  Inc R4
Excelsior Value &       2,500       www.excelsiorfunds.com
  Restructuring
1st Source Monogram     1,000       www.Istsource.com
  Income Equity
American Beacon Lg          0       www.americanbeaconfunds.com
  Cap Value AMR
Monteagle Value         2,000       www.memorialfunds.com
RiverSource Equity          0       www.riversource.com
  Value R4
DFA Tax-Managed U.S.        0       www.dfafunds.com
  Marketwide Value
  II
Seligman Large Cap          0       www.seligman.com
  Value 1
Vanguard Value Index    3,000       www.vanguard.com
MFS Value I                 0       www.mfs.com

Large Blend

Janus Contrarian        2,500       wwwjanus.com
Fairholme               2,500       www.fairholmefunds.com
Neuberger Berman        1,000       www.nb.com
  Partners Inv
American Funds-           250       www.americanfunds.com
  Fundamental Invs F
FMI Large Cap           1,000       www.fiduciarymgt.com

Mid-Cap Growth

BlackRock U.S.          5,000       www.blackrock.com
  Opportunities Svc
Roosevelt Anti-         1,000       www.anti-terrorfund.com
  Terror Multi-Cap
Dreyfus Premier S&P     1,000       www.dreyfus.com
  Stars Opp I
Neuberger Berman Mid    1,000       www.nb.com
  Cap Growth Inv
Sit Mid Cap Growth      5,000       www.sitfunds.com

Mid-Cap Value

RiverSource Mid Cap     2,000       www.riversource.com
  Value R4
Columbia Mid Cap            0       www.columbiafunds.com
  Value Z
Allegiant Mid Cap           0       www.allegiantfunds.com
  Value I
Delafield               5,000       www.delafieldfund.com
Heartland Select        1,000       www.heartlandfunds.com
  Value

Small-Cap Growth

Winslow Green Growth    5,000       www.winslowgreen.com
Excelsior Small Cap     2,500       www.excelsiorfunds.com
BlackRock Small Cap     5,000       www.blackrock.com
  Grth Equity Svc
TCW Small Cap           2,000       www.tcw.com
  Growth I

Small-Cap Value

Columbia Small Cap          0       www.columbiafunds.com
  Value II Z
Columbia Small Cap      2,500       www.columbiafunds.com
  Value I Z
Franklin Small Cap      1,000       www.franklintempleton.com
  Value R
JHT Small Company           0       www.jhannuities.com
  Value Trust Ser I

Diversified Emerging Ma

DFA Emerging Markets        0       www.dfafunds.com
  Value I
Fidelity Emerging       2,500       www.fidelity.com
  Markets
T. Rowe Price           2,500       www.troweprice.com
  Emerging Markets
  Stock

SOURCE: MORNINGSTAR INC. MORNINGSTAR MAKES EVERY EFFORT TO ENSURE THE
ACCURACY AND COMPLETENESS OF THIS DATA, BUT CANNOT GUARANTEE IT.
TOP FUNDS IN EACH CATEGORY RANKED BY FIVE-YEAR RETURNS WITH A MINIMUM
INVESTMENT OF $5,000 OR LESS RETURNS THROUGH 1/30/08

The Moneywise 100

                       Ticker   5-year   5-Year        Expense
Fund Name              Symbol   Return   Risk Rating   Ratio

Foreign Large Value

Dodge & Cox            DODFX    25.7     High          0.66
  International
  Stock
DFA Intl Value I       DFIVX    25.6     Above Avg     0.44
Harbor International   HIINX    25.0     High          1.19
  Inv
DFA Tax-Managed Intl   DTMIX    25.0     Above Avg     0.54
  Value
Thomas White           TWWDX    24.6     High          1.42
  International
Vanguard               VTRIX    22.5     Above Avg     0.45
  International
  Value

Foreign Large Blend

Fidelity Canada        FICDX    27.8     High          0.97
Elfun International    EGLBX    24.0     Above Avg     0.18
  Equity
Sextant                SSIFX    22.9     Above Avg     1.02
  International
New Century            NCFPX    22.8     High          1.35
  International
Fidelity               FIGRX    22.7     Above Avg     1.00
  International
  Discovery
American Funds         AEGFX    21.6     Average       0.78
  EuroPacific Gr F
Manning & Napier       EXWAX    21.4     Average       1.16
  World
  Opportunities A
American Funds         CEUEX    21.2     Average       1.11
  EuroPacific Gr
  529E
GE International       GEIDX    21.1     Above Avg     1.20
  Equity Y
ING Julius Baer        UBSX     20.9     Above Avg     1.13
  Foreign S
UMB Scout              UMBWX    20.6     Low           0.97
  International
Matthews Asian         MATFX    23.8     Average       1.39
  Technology
Turner New             TBTBX    22.6     High          1.61
  Enterprise
Waddell & Reed Adv     USTFX    17.8     Low           1.01
  Science & Tech Y
BlackRock Global Sci   BSTSX    16.0     Below Avg     1.73
  & Tech Opp Svc
Fidelity Select        FSHCX    20.7     Above Avg     0.94
  Medical Delivery
T. Rowe Price Health   PRHSX    17.4     Average       0.87
  Sciences
VALIC I Health         VCHSX    16.7     Above Avg     1.17
  Sciences
JHT Health Sciences    JEHSX    16.4     Average       1.16
  Trust Ser I
Hartford Global        HIAHX    13.7     Average       0.87
  Health HLS IA
U.S. Global            UNWPX    37.0     Above Avg     0.99
  Investors
  WrldPrecMineral
USAA Precious Metals   USAGX    32.8     Average       1.21
  and Minerals
Alpine International   EGLBX    25.8     Low           1.14
  Real Estate
ING Van Kampen Real    IVRSX    21.1     Average       0.90
  Estate S

Intermediate Bond

Metropolitan West      MWTRX     7.3     Average       0.65
  Total Return
  Bond M
Managers Bond          MGFIX     6.6     High          0.99
Westcore Plus Bond     WTIBX     6.5     Below Avg     0.55
Baird Core Plus Bond   BCOSX     6.0     Average       0.55
  Inv
Principal Inv Income   PIOIX     5.7     Above Avg     0.51
  Inst
Vanguard Interm-Term   VBIIX     5.4     High          0.18
  Bond Index
TCW Core Fixed-        TGCFX     5.3     Average       0.50
  income I
TCW Total Return       TGLMX     5.1     Low           0.44
  Bond I
Vanguard Interm-       VFICX     5.1     Above Avg     0.21
  Term Investment-
  Grade
T. Rowe Price New      PRCIX     4.9     Average       0.66
  Income

High Yield Bond

Fidelity Advisor       FAHCA    13.8     High          1.81
  High income
  Advantage I
Principal Inv High     PHYTX    12.7     Above Avg     0.53
  Yield II Inst
Fidelity Capital &     FAGIX    12.4     High          0.75
  Income
Julius Baer Global     BJBHX    10.7     Above Avg     1.08
  High Income A
Putnam High Yield      PHAYX    10.6     Average       0.79
  Advantage Y
RiverSource High       RSHYX    10.0     Average       0.93
  Yield Bond R4
Putnam High Yield Y    PHYYX     9.8     Average       0.78
American Funds         AHTFX     9.8     Average       0.67
  American Hi Inc
  Tr F
Wells Fargo            SHYYX     9.7     Below Avg     0.43
  Advantage High
  Income I

                       Minimum
                       Initial
Fund Name              Investment   Website

Foreign Large Value

Dodge & Cox             2,500       www.dodgeandcox.com
  International
  Stock
DFA Intl Value I            0       www.dfafunds.com
Harbor International    2,500       www.harborfunds.com
  Inv
DFA Tax-Managed Intl        0       www.dfafunds.com
  Value
Thomas White            2,500       www.thomaswhite.com
  International
Vanguard                3,000       www.vanguard.com
  International
  Value

Foreign Large Blend

Fidelity Canada         2,500       www.fidelity.com
Elfun International       500       www.gefunds.com/elfun
  Equity
Sextant                 1,000       www.saturna.com
  International
New Century             1,000       www.newcenturyportfolios.com
  International
Fidelity                2,500       www.fidelity.com
  International
  Discovery
American Funds            250       www.americanfunds.com
  EuroPacific Gr F
Manning & Napier        2,000       www.manningnapieradvisors.com
  World
  Opportunities A
American Funds            250       www.americanfunds.com
  EuroPacific Gr
  529E
GE International          500       www.gefunds.com
  Equity Y
ING Julius Baer             0       www.ingfunds.com
  Foreign S
UMB Scout               1,000       www.umb.com
  International
Matthews Asian          2,500       www.matthewsfunds.com
  Technology
Turner New              2,500       www.turnerinvestments.com
  Enterprise
Waddell & Reed Adv          0       www.waddell.com
  Science & Tech Y
BlackRock Global Sci    5,000       www.blackrock.com
  & Tech Opp Svc
Fidelity Select         2,500       www.fidelity.com
  Medical Delivery
T. Rowe Price Health    2,500       www.troweprice.com
  Sciences
VALIC I Health              0       www.aigvalic.com
  Sciences
JHT Health Sciences         0       www.jhannuities.com
  Trust Ser I
Hartford Global             0       www.hartfordlife.com
  Health HLS IA
U.S. Global             5,000       www.usfunds.com
  Investors
  WrldPrecMineral
USAA Precious Metals    3,000       www.usaa.com
  and Minerals
Alpine International    1,000       www.alpinecef.com
  Real Estate
ING Van Kampen Real         0       www.ingfunds.com
  Estate S

Intermediate Bond

Metropolitan West       5,000       www.mwamllc.com
  Total Return
  Bond M
Managers Bond           2,000       www.managersfunds.com
Westcore Plus Bond      2,500       www.westcore.com
Baird Core Plus Bond    2,500       www.rwbaird.com
  Inv
Principal Inv Income        0       www.principal.com
  Inst
Vanguard Interm-Term    3,000       www.vanguard.com
  Bond Index
TCW Core Fixed-         2,000       www.tcw.com
  income I
TCW Total Return        2,000       www.tcw.com
  Bond I
Vanguard Interm-        3,000       www.vanguard.com
  Term Investment-
  Grade
T. Rowe Price New       2,500       www.troweprice.com
  Income

High Yield Bond

Fidelity Advisor        2,500       www.fidelity.com
  High income
  Advantage I
Principal Inv High          0       www.principal.com
  Yield II Inst
Fidelity Capital &      2,500       www.fidelity.com
  Income
Julius Baer Global      1,000       www.us-funds.juliusbaer.com
  High Income A
Putnam High Yield         500       www.putnaminvestments.com
  Advantage Y
RiverSource High        2,000       www.riversource.com
  Yield Bond R4
Putnam High Yield Y       500       www.putnaminvestments.com
American Funds            250       www.americanfunds.com
  American Hi Inc
  Tr F
Wells Fargo                 0       www.wellsfargofunds.com
  Advantage High
  Income I

SOURCE: MORNINGSTAR INC. MORNINGSTAR MAKES EVERY EFFORT TO ENSURE THE
ACCURACY AND COMPLETENESS OF THIS DATA, BUT CANNOT GUARANTEE IT.
TOP FUNDS IN EACH CATEGORY RANKED BY FIVE-YEAR RETURNS. ETF RANKED
BY THREE-YEAR RETURNS WITH A MINIMUM INVESTMENT OF $5,000 OR LESS
RETURNS THROUGH 1/30/08.