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
RELATED FAQS
  1. What is socially responsible investing?

    In the financial world, where profit and return are often the priorities of the average investor, the vehicles we use to ... Read Answer >>
  2. 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 >>
  3. Can a socially responsible investor invest in the metals and mining sector?

    Environmentally and culturally conscious investors can find potential opportunities in the metals and mining sector. Read Answer >>
  4. 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 >>
  5. Is there a difference between socially responsible investing (SRI) and green investing?

    Green investing is considered a subset of socially responsible investing. Both of these terms refer to investment philosophies ... Read Answer >>
  6. Why is social responsibility important to a business?

    Take social responsibility seriously, and your business could benefit from happier, more productive staff members while helping ... Read Answer >>
Related Articles
  1. Investing

    Socially Responsible Mutual Funds

    It is possible to avoid unethical investments and still profit from mutual funds. Find out how!
  2. Managing Wealth

    Go Green With Socially Responsible Investing

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

    Four Socially Responsible Stocks To Watch

    Making money in the market shouldn't prevent you from sleeping at night. Find out how to keep your conscience clean and bank account growing.
  4. Investing

    Five Stocks For The Socially Responsible Investor

    Making money in the market shouldn't prevent you from sleeping at night. Find out how to keep your conscience clean and bank account growing.
  5. Investing

    The Difference Between Social and Impact Investing

    ESG? SRI? How to make sense of socially-responsible and impact investing.
  6. Financial Advisor

    Investing in More Than Money: A SRI How-to Guide

    Here's how socially responsible investing stacks up against green and impact investing. Which category is right for you? Read on.
  7. Financial Advisor

    SRI Funds and Your 401(k): What You Need to Know

    Socially responsible, green and impact investing options are now DoL-approved for 401(k) plans. Here's what investors should know.
  8. 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.
  9. Managing Wealth

    The Evolution Of Sinful Investing

    Like beauty, whether something is sinful often depends whom you ask.
  10. Retirement

    Is Social Security the Next President’s Problem?

    Social Security isn't going bankrupt, but someone will need to fix it at some point.
RELATED TERMS
  1. Impact Investing

    Investing that aims to generate specific beneficial social or ...
  2. Social Impact Statement

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

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

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

    Corporate initiative to assess and take responsibility for the ...
  6. Environmental, Social And Governance (ESG) Criteria

    A set of standards for a company’s operations that socially ...
Hot Definitions
  1. Return on Market Value of Equity - ROME

    Return on market value of equity (ROME) is a comparative measure typically used by analysts to identify companies that generate ...
  2. Majority Shareholder

    A person or entity that owns more than 50% of a company's outstanding shares. The majority shareholder is often the founder ...
  3. Competitive Advantage

    An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers ...
  4. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities ...
  5. Wash-Sale Rule

    An Internal Revenue Service (IRS) rule that prohibits a taxpayer from claiming a loss on the sale or trade of a security ...
  6. Porter Diamond

    A model that attempts to explain the competitive advantage some nations or groups have due to certain factors available to ...
Trading Center