A:

In the financial world, where profit and return are often the priorities of the average investor, the vehicles we use to reach our monetary goals can be overlooked. We know that mutual funds are able to offer instant diversification to individual investors; they give investors access both to different parts of a nation's economy and to the global marketplace. But another, perhaps buried, concern is the idea of socially responsible investing. While investing in a big name arms manufacturer may produce a tidy return in a person's portfolio, it can be disturbing to learn that the weapons being manufactured eventually become a payload in some foreign country.

By not investing in stocks that do business in areas such as gambling and the manufacturing of weapons, tobacco, drugs and alcohol products, individuals can impose their own social and moral values on their portfolios. Furthermore, people can choose to invest in companies that they believe are making valuable social and environmental contributions, such as educational companies or companies that make an effort to curb pollution and protect the environment.

Of course, people will have different ideas as to what is socially responsible, ethical or even moral. If investors choose securities in accordance with their own beliefs, it's up to them to choose the investments they consider appropriate. By deciding to invest in companies that are socially responsible and accountable, investors can not only realize financial gain, they can also feel they have contributed to a worthy cause.

To learn more about this subject, see Socially Responsible Mutual Funds and Go Green With Socially Responsible Investing.

RELATED FAQS
  1. What is a "socially responsible" mutual fund?

    As the name suggests, socially responsible mutual funds invest exclusively in socially responsible investments. Read Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
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. Investing

    When Socially Responsible Investing Hurts

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

    Go Green With Socially Responsible Investing

    Find out how morals and ethics can bring you a surprising return.
  4. 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.
  5. Investing

    The Value in Socially Responsible Investing

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

    A Guide to Socially Responsible Investing

    This is where socially responsible investing came from and what it means.
  7. Investing

    What is Socially Responsible Investing?

    Whatever term you use to describe it, socially responsible investing continues to rise in the U.S.
  8. 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.
  9. Investing

    Socially (Ir)responsible Mutual Funds

    Not concerned about being an ethical investor? Maybe "sinful stocks" have a place in your portfolio.
RELATED TERMS
  1. Social Responsibility

    The idea that a company should embrace its social responsibilities ...
  2. Socially Responsible Investment - SRI

    Socially responsible investing looks for investments that are ...
  3. Impact Investing

    Investing that aims to generate specific beneficial social or ...
  4. Social Capital

    An economic idea that refers to the connections between individuals ...
  5. Social Security Trust Fund

    An account used by the United States federal government to record ...
  6. Social Sentiment Indicator

    A measurement based on aggregated social media data that helps ...
Hot Definitions
  1. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  2. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  3. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  4. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  5. Mezzanine Financing

    A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies. Mezzanine financing ...
  6. Long Run

    A period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all ...
Trading Center