A mutual fund is not a bank deposit and is not secured. There is no guarantee on returns and you can lose money. If you are investing in a domestic equity fund (a mutual fund that only holds stocks of U.S. companies), you are buying stock in the American economy, which is more and more connected to the global economy. If investors believe that the global economy is expanding and that it will continue to expand, they are willing to bet on higher risk investments. If investors see indicators that the global economy is not expanding, they would put their money into safer investments like bonds, or keep their money in savings and CDs.

Amy Domini is the founder and CEO of Domini Social Investments. In 2005, Time magazine recognized her as one of the world’s most influential people. Ms. Domini is the author of many books, including Socially Responsible Investing: Making a Difference and Making Money. She is a frequent guest commentator on CNBC’s Talking Stocks and various other radio and television shows. Photo © bluestocking/Fotolia