The 1st responder's answer is exactly correct. If you put a large amount into a mutual fund that invests in equity investments and the stock market collapses, then you will loose money. That is the simple answer.
Mutual funds are not all the same and they do not make the same investments. Some have a much greater amount of market risk than others. For example one labeled as "aggressive growth" is very likely to loose 1/2 of its value during a bear market. One labeled as "short term government bonds" is likely to loose very little if any of its value during a bear market. In fact it is likely to increase in value.
Depending on your time horizon and the particular mutual fund that you pick, it may be very risky placing a large amount of money into one particular mutual fund. Most equity mutual funds tend to have an average annual return of about 8% to 12% annually over a long period of time--10 years and more. But during shorter investment periods these returns tend to vary greatly from -50% to +50% and more. There are actually some mutual funds, not many but some, that the annual return since 2000 has been negative. Those who had invested in these funds are not very happy today.
A wiser strategy than investing a huge sum into one particular mutual fund is to break that huge sum into portions. Place one portion into a money market fund, one portion into a capital appreciation fund, one portion into a fund that invests in international companies, one portion into an equity income fund, and maybe one portion into a short term bond fund. There are actually particular funds that do that called asset allocation funds, but it is not real smart to put all of ones money into just one fund. There is also the possibility that one particular fund might have bad management. It is a good idea to insulate yourself from that possibility as much as possible and that is best accomplished by spreading your investments around.
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