Utilities Mutual Funds: 5 Best Picks for 2023

Utilities mutual funds invest in companies that provide essential services such as electricity, gas, water, and telecommunications. These funds are considered defensive investments because they tend to perform well during both good and bad economic times.

Top 5 Utilities Mutual Funds for 2023

1. Fidelity Utilities Fund (FDULX): This fund has a long history of outperforming its peers, with an average annual return of 9.2% over the past 10 years. It has a low expense ratio of 0.54% and invests in a mix of large-cap and mid-cap utilities stocks.
2. Vanguard Utilities Index Fund (VPU): This fund is a low-cost option for investors looking to track the performance of the utilities sector. It has an expense ratio of just 0.10% and invests in a broad range of utilities stocks.
3. iShares Core Utilities ETF (IDU): This ETF is another low-cost option for investors looking to get exposure to the utilities sector. It has an expense ratio of 0.40% and invests in a basket of large-cap utilities stocks.
4. SPDR Utilities Select Sector Fund (XLU): This fund is a good choice for investors looking for a more concentrated exposure to the utilities sector. It has an expense ratio of 0.13% and invests in a portfolio of 28 large-cap utilities stocks.
5. Invesco Utilities ETF (IUTIL): This ETF is a good choice for investors looking for a more diversified exposure to the utilities sector. It has an expense ratio of 0.45% and invests in a portfolio of over 100 utilities stocks.

Benefits of Investing in Utilities Mutual Funds

There are several benefits to investing in utilities mutual funds, including:

• Defensive investment: Utilities stocks tend to be less volatile than the broader market, making them a good choice for investors looking to protect their capital during periods of economic uncertainty.
• Dividend income: Utilities companies typically pay high dividends, providing investors with a steady stream of income.
• Long-term growth: Utilities stocks have a history of outperforming the broader market over the long term, making them a good choice for investors looking to grow their wealth.

Risks of Investing in Utilities Mutual Funds

There are also some risks associated with investing in utilities mutual funds, including:

• Interest rate risk: Utilities stocks are sensitive to interest rates, and their prices can decline if interest rates rise.
• Regulatory risk: Utilities companies are subject to regulation, which can impact their earnings and stock prices.
• Economic risk: Utilities stocks can be affected by economic downturns, which can lead to lower earnings and stock prices.

Conclusion

Utilities mutual funds can be a good investment for investors looking for a defensive investment with the potential for long-term growth. However, it is important to be aware of the risks associated with these funds before investing.