Query: How to exclude stock from mutual fund

Relevant passages:
 <=SEP=> "Chris - you realize that when you buy a stock, the seller gets the money, not the company itself, unless of course, you bought IPO shares. And the amount you'd own would be such a small portion of the company, they don't know you exist.  As far as morals go, if you wish to avoid certain stocks for this reason, look at the Socially Responsible funds that are out there. There are also funds that are targeted to certain religions and avoid alcohol and tobacco. The other choice is to invest in individual stocks which for the small investor is very tough and expensive. You'll spend more money to avoid the shares than these very shares are worth.  Your proposal is interesting but impractical. In a portfolio of say $100K in the S&P, the bottom 400 stocks are disproportionately smaller amounts of money in those shares than the top 100. So we're talking $100 or less. You'd need to short 2 or 3 shares. Even at $1M in that fund, 20-30 shares shorted is pretty silly, no offense.  Why not 'do the math' and during the year you purchase the fund, donate the amount you own in the ""bad"" companies to charity.  And what littleadv said - that too."

 <=SEP=> "Mutual funds invest according to their prospectus. If they declare that they match the investments to a certain index - then that's what they should do. If you don't want to be invested in a company that is part of that index, then don't invest in that fund. Short-selling doesn't ""exclude"" your investment. You cannot sell your portion of the position in the fund to cover it. Bottom line is that money has no smell. But if you want to avoid investing in a certain company and it is important to you - you should also avoid the funds that invest in it, and companies that own portions of it, and also probably the companies that buy their products or services. Otherwise, its just ""nice talk"" bigotry."

 <=SEP=> Owning a stock via a fund and selling it short simultaneously should have the same net financial effect as not owning the stock.  This should work both for your personal finances as well as the impact of (not) owning the shares has on the stock's price. To use an extreme example, suppose there are 4 million outstanding shares of Evil Oil Company.  Suppose a group of concerned index fund investors owns 25% of the stock and sells short the same amount.   They've borrowed someone else's 25% of the company and sold it to a third party.  It should have the same effect as selling their own shares of the company, which they can't otherwise do.  Now when 25% of the company's stock becomes available for purchase at market price, what happens to the stock?  It falls, of course.   Regarding how it affects your own finances, suppose the stock price rises and the investors have to return the shares to the lender.  They buy 1 million shares at market price, pushing the stock price up, give them back, and then sell another million shares short, subsequently pushing the stock price back down. If enough people do this to effect the share price of a stock or asset class, the managers at the companies might be forced into behaving in a way that satisfies the investors.  In your case, perhaps the company could issue a press release and fire the employee that tried to extort money from your wife's estate in order to win your investment business back.  Okay, well maybe that's a stretch.