Even during a market downturn, the demand for essential services such as those provided by utilities, remains virtually unchanged. Utilities funds are therefore an excellent choice for investors seeking a steady income flow through consistent yields from dividends. This is also why they are primarily considered to be a relatively more conservative investment option. In recent times their forays into emerging markets have led to appreciably higher returns and they offer superior returns at a relatively lower level of risk.
Below we will share with you 5 top rated utilities mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect the fund to outperform its peers in the future.
Putnam Global Utilities A (PUGIX) invests primarily in utility companies worldwide. The fund concentrates on large and mid-sized firms, but may also consider smaller companies. It seeks both capital appreciation and current income. This utilities mutual fund has a five year annualized return of 2.95%.
The utilities mutual fund has a minimum initial investment of $500 and an expense ratio of 1.36% compared to a category average of 1.43%.
MFS Utilities A (MMUFX) seeks total return. It invests the majority of its assets is securities issued by companies from the utilities sector. It focuses on purchasing equity securities but may also purchase debt instruments. Most of the debt securities held are rated investment grade, but the fund may also consider investing in securities of lower quality. This utilities mutual fund has a three year annualized return of 2.03%.
The fund manager is Maura A. Shaughnessy and she has managed this utilities mutual fund since 1992.
Fidelity Select Utilities (FSUTX) invests the majority of its assets in utility companies or those deriving a large share of their revenues from operations in this sector. It is non-diversified and may purchase foreign securities. It may also invest a large share of its assets in a single issuer. It is a no-load fund.
The utilities mutual fund returned 22.04% in the last one year period and has a five year annualized return of 3.78%.
Vanguard Utilities Index Admiral Shares (VUIAX) seeks to track the performance of the MSCI U.S. Investable Market Utilities Index. This is index consists of companies in the utilities sector regardless of their market capitalization. This utilities mutual fund returned 16.85% over the last one year period.
As of December 2010, this utilities mutual fund held 87 issues, with 6.64% of its total assets invested in Southern Company.
Franklin Utilities A (FKUTX) concentrates on purchasing equity in public utilities companies. More than 25% of its assets are invested in companies that provide electricity, gas, water and communication services. The utilities mutual fund returned 16.58% in the last one year period and has a ten year annualized return of 6.59%.
The utilities mutual fund has a minimum initial investment of $1,000 and an expense ratio of 0.78% compared to a category average of 1.43%.
To view the Zacks Rank and past performance of all utilities mutual funds, then click here.