As all other investments ways, investing in a mutual funds includes an average amount of risk. Stock and bond prices go up and down every day. So as the value of the underlying instruments which pool of funds was invested is adjusting, so does the valueof your mutual fund money invested. Depending on the market conditions, there may be periods in which you may lose money. However, until you actually liquidate or withdraw you money invested from the mutual fund, these will simply remain, "paper losses" which can be recovered when market conditions stabilize.
In addition, the fund managers of the fund also do many things to control and minimize the risk. First, they analyze all investments thoroughly before including any stock or bond in the portfolio. Second, they ensure that the fund is properly diversified, i.e. invested in many different stocks or bonds. As such, a drop in the price of one investment may be off-set by gains in another. Third, the fund managers are subject to regular and internal investment restrictions that prevent the fund from being invested from certain speculative investments and encourage proper diversification.
While there are risk in mutual fund investing, the returns can also be reqarding in the long-run. There is always a risk return on trading in any investment. What is important is to know how much risk you are willing and able to take and select an investment whose risk provide matches yours.
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