From
Your Perspective:
Socially responsible mutual funds
Similarities to other mutual funds
Like other mutual funds, a socially responsible fund raises money to make its purchases, known as its
underlying investments,
by selling shares in the fund.
Like any other
open-end mutual fund, an SR fund will sell as many shares as you and other investors want to buy and
redeem
any shares you want to sell.
Mutual fund shares are
liquid,
which means you can redeem them almost immediately at their current
net asset value (NAV)
— minus any fees the fund may charge at redemption. The NAV at which you sell could be above or below the price you paid to purchase the shares, resulting in a
capital gain
or
capital loss.
(You might also have gains or losses at the end of the year, based on investments that the fund sold during the year.)
Many socially responsible funds are actively managed, with a manager or managers choosing investments from among those that pass the fund's screening process. Others are passively managed
index funds,
tracking the performance of
indexes
whose components pass a clearly defined set of screens. Among the indexes that serve as the basis of these funds are the Domini 400 Social Index, the Catholic Values 400 Index, the Global Climate 100 Index from KLD Research & Analytics, Inc., the Calvert Social Index, and the Dow Jones Islamic Market family of indexes.
Some fund companies offer exclusively socially responsible funds while others include SR funds as members of their larger fund family.
