How to find a fund that doesn't make your eye twitch

— -- When you invest in the stock market, you have to decide whether your potential gains are worth your possible losses. Some people can shrug off a 20% loss, while others shout, "I'm ruined!" when they lose $10.

If the stock market's recent gyrations have started your left eye twitching, you may own investments that are too risky for your disposition. How can you find a mutual fund that fits your risk tolerance? A few useful statistical measures can help you decide. But, ultimately, your tolerance for pain is the best gauge.

Analysts break down risk into several categories. Opportunity risk, for example, refers to the chance of missing out on something good, such as that last big stock rally. Event risk refers to the possibility of something going horribly wrong, such as finding winged goats perched outside your biotechnology lab.

Maximum drawdown isn't a figure that most funds disclose, though it would be nice if they did. If you want a good idea of a fund's worst performance, take a look at its record in 2002, a kidney stone of a year. The Vanguard 500 Index fund plunged 22.2% that year. If the thought of seeing $10,000 turn into $7,780 turns your blood cold, then you need a tamer fund. You can find the 2002 record for many funds at www.morningstar.com.

Morningstar (and the fund companies themselves) also produce several statistical risk measures that are worth reviewing:

•Standard deviation measures how much a fund's returns have varied from its average return. It's a useful measure of your fund's volatility. As a rule, 68% of a fund's returns will fall within one standard deviation of the average, and 95% will be within two standard deviations of the average.