Yes, there are risks in mutual funds but not all mutual funds involve the same risk. While investing in Debt Mutual Funds the risk of losing money is much lower as compared to equity mutual funds. However, your returns are also proportionally lower.
The risk factor of Equity Mutual Funds goes up because the underlying asset is equities. Their values go up and down as per the volatility of the stock market. (See chart below)
It is recommended to make long term investments which are paid in small amounts every month through an SIP. This process will help you take advantage of Rupee cost averaging, thereby bringing down average costs.
The stat above states that, over the long term, you can see the Sensex delivering an average return of ~16.9% per annum making it one of the best asset classes for growing your money.
So, if you had invested Rs 1000 in the index in the year 1991, it would have grown to almost Rs 19,000 in February 2008. However, by December 2008, its value would have come down to almost half at Rs 8000.
If you sold in panic in December 2008, you would have lost 50% from a peak, but if you had held it on till 2015, it would have bounced back to Rs 25,000.