Many mutual funds lose money, lots of money. For example, in the first 6 months of 2001:

It's not unusual for the top money-making fund one year, to turn around and lose 25% the following year.

If a fund is in the top 25% in a given year, there is only a 28% chance that it will repeat this performance the following year and stay in the top 25% of funds. Last year's hot fund is rarely a top performer 2 years in a row.

But there are funds that have outperformed the general market over 10 years in a row. This said, let's continue with your mutual fund education.
 

Other Stock Market Basics Topics:

1. Mutual Fund Advantages
2. History of Mutual Funds
3. NAV
4. Dollar Cost Averaging
5. General advice about choosing a fund
6. Mutual Fund Ratings
7. Evaluating Mutual Fund Investment Risk
8. Mutual Fund Share Classes
9. Mutual Fund Fees
10. The Mutual Fund Prospectus
11. How important is the manager's length of experience?
12. Why is the prospectus hard to understand?
13. Mutual Fund Annual Report
14. Comparing your fund to the competition
15. Comparing funds on an after-tax basis
16. Average Return on Investment
17. How Not to Pick a Mutual Fund
18. Cashing in Your Fund
19. When to Sell Your Fund
20. Mutual Funds and Asset Allocation
21. When to get started with a mutual fund
22. Types of Mutual Funds
23. Value Stock Funds
24. Growth Stock Funds
25. Small and Micro-cap Stocks
26. Mid Cap
27. Large Cap Companies
28. Income Stock Funds
29. Mutual Fund Index
30. Enhanced Index Funds
31. Sector Mutual Funds
32. Stock Market Sectors
33. Defensive Stocks
34. International Funds
35. Real Estate Mutual Funds
36. Socially Responsible Funds
37. Balanced Funds
38. Tax-Efficient Funds
39. Bond Convertible Funds
40. Junk Bond Funds
41. Mixtures of stock types
42. Closed End Funds
43. Exchange Traded Funds (ETF’s)
44. Stock Picking Strategy - Picking your own stocks?
45. Fund names, and what they really invest in
46. How to get started
47. Where can I start investing with no money?