A:

As the name suggests, socially responsible mutual funds invest exclusively in socially responsible investments. Securities from companies that adhere to social, moral, religious and/or environmental beliefs are a few examples.

In addition to basic quantitative analysis, a socially responsible portfolio manager takes into account a company's community investment, environmental responsibility, protection of human rights, employment diversity, animal testing and product offering. Companies that produce weapons, gambling facilities, alcohol and tobacco are also often excluded. Because individuals have varying values, beliefs and investment goals, there are a number of different types of socially responsible mutual funds available. Some might include only equities or bonds, while others might hold a combination of the two. Furthermore, some funds might specialize in being free of securities from alcohol, casino and tobacco companies, while others might invest exclusively in companies that are environmentally responsible.

Securities that have been screened for socially responsible criteria are then combined to achieve a specific investing style and goal. A portfolio manager will decide whether the fund will be made up of:

  • equity, fixed income or both (balanced)
  • domestic or international securities
  • small, mid, or large cap stocks

How does the performance of socially responsible mutual funds measure up to that of a regular portfolio? On average, their performance has been comparable to that of regular mutual funds. According to KLD Indexes, the Domini 400 Social Index YTD return as of September 30, 2007 was 7.19%, compared to the S&P 500 return of 9.13%.

To learn more about this subject, see Socially Responsible Mutual Funds, Go Green With Socially Responsible Investing and Change The World One Investment At A Time.

RELATED FAQS
  1. How do you craft an effective social responsibility policy?

    Craft social responsibility policies to brand the business, provide direction for the company's mission and motivate employees ... Read Answer >>
  2. How can a social responsibility consulting firm benefit a business?

    Learn about some of the ways that a socially responsible business consultant can help corporations and other businesses over ... Read Answer >>
  3. How can a socially responsible investor gain exposure to the metals and mining sector?

    Read about social responsibility and the metals and mining sector, and how environmentally and culturally conscious investors ... Read Answer >>
  4. Is there a difference between socially responsible investing (SRI) and green investing?

    There isn't a huge difference between socially responsible investing (SRI) and green investing; green investing is actually ... Read Answer >>
  5. Why is social responsibility important in marketing?

    Drive consumers toward products and services by prioritizing social responsibility in marketing to enhance the company's ... Read Answer >>
Related Articles
  1. Managing Wealth

    Go Green With Socially Responsible Investing

    Find out how morals and ethics can bring you a surprising return.
  2. Investing

    When Socially Responsible Investing Hurts

    Socially responsible investing can make you feel good but it may not boost your returns.
  3. Investing

    The Value In Socially Responsible Investing

    Socially responsible investing has been growing in popularity. Discover if it's the right strategy for you.
  4. Investing

    Make Employees Happier with This Simple Tip

    Offering socially responsible options is a good way to increase employees' sense of satisfaction, which can lead to improved morale among other things.
  5. Investing

    Socially (Ir)responsible Mutual Funds

    Not concerned about being an ethical investor? Maybe "sinful stocks" have a place in your portfolio.
  6. Investing

    The Difference Between Social and Impact Investing

    ESG? SRI? How to make sense of socially-responsible and impact investing.
  7. Investing

    Socially Responsible Stocks: Do Good Deeds Punish Profits?

    Socially responsible investing doesn't mean accepting lower returns. Find out why squeaky-clean stocks shine as investments.
  8. Investing

    Impact Investing: The Ethical Choice

    This new wave in ethical investing is taking a new approach. Find out how it differs from its predecessors.
  9. Managing Wealth

    "Value" Investments: Social, Faith & Eco-Investing

    When it's time to invest, why not follow your heart along with your head? These four types of investments seek to do good while returning a profit.
RELATED TERMS
  1. Socially Responsible Investment - SRI

    Socially responsible investing looks for investments that are ...
  2. Social Responsibility

    The idea that a company should embrace its social responsibilities ...
  3. Social Impact Statement

    A company's account of how its operations affect social and environmental ...
  4. Domini 400 Social Index

    A market cap weighted stock index of 400 publicly traded companies ...
  5. Social Security Trust Fund

    An account used by the United States federal government to record ...
  6. Corporate Social Responsibility

    Corporate initiative to assess and take responsibility for the ...
Hot Definitions
  1. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  2. Pro Forma

    A Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results ...
  3. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
  4. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  5. Portable Alpha

    A strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index ...
  6. Run Rate

    1. How the financial performance of a company would look if you were to extrapolate current results out over a certain period ...
Trading Center