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hat are the chances of my losing money?

Every investor must ask this question when making an investment.

The higher the risk you take with your money, the greater the chance of higher returns. The lower the risk, the lower the return. So don't getting misled by high returns. You could lose all your money.

That is why equity (shares) rates high on the risk factor when compared to other investments like post office saving schemes, fixed deposits and bonds. The returns can be phenomenal. So are the chances of you losing your money.

An equity mutual fund is safer than directly investing in the stock market, because it invests in a wide range of companies and sectors, diversifying the risk.  

So how do you rate your mutual fund?

Here is a quick and easy way to identify funds that have produced strong risk-adjusted performance vis-a-vis their peers.

How the rating is done:

i. A fund's return for each month is taken since the day it is launched. This return is compared to other 'riskless' investments. These would be government investments which have no risk per se. This means the funds do not rate very high if they give phenomenal returns, but have taken tremendous risks to do so.

ii. Only equity funds with a minimum performance history of three years are considered.

iii. The ones listed here are the 5-star ratings (the lowest are 1-star). These are the best ones available today. Which means they will give you good returns without putting your money at too much of a risk.

Equity diversified

These are funds that invest in the shares of companies from various sectors.   

	3-month return	1-year return	Return since launch
Alliance Basic Industries	8.53	28.77	29.27
Franklin India Prima	20.43	62.31	24.43
Magnum Contra	23.27	81.38	27.85
Reliance [Get Quote] Growth	21.14	60.11	30.25
Reliance Vision	18.99	36.05	26.17
Tata Growth	15.25	45.76	7.10

• Top 5 equity funds of 2004 

Equity tax planning

 Also known as Equity Linked Saving Schemes, these funds are diversified equity funds with a tax benefit.  

	3-month return	1-year return	Return since launch
Birla Taxplan '98	13.44	45.07	39.89
HDFC [Get Quote] Long-term Advantage	10.21	53.62	45.63
HDFC Taxsaver	20.09	68.77	41.44
UTI MEP '98	11.49	34.59	20.49

The returns are annualised percentages.

• Invest in an ELSS fund. Earn big!

The star ratings are better suited to judge past performance than predict the future.

We advise you not to base your investment decision on ratings alone. But we can assure you that Value Research Fund Rating is definitely a good starting point.

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