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Mutual Fund Commentary

Utilities funds are an excellent choice for investors seeking a steady income flow. They are also used as defensive instruments, which protect investments during a market downturn. This is because the demand for essential services such as those provided by utilities remains unchanged even during difficult times. In recent years, many funds in this category have increased their exposure to emerging markets and unregulated companies. This has increased the risk involved but has also generated higher returns.

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.  To view the Zacks Rank and past performance of all utilities funds, investors can click here to see the complete list of funds.

Gabelli Utilities AAA (GABUX - MF report) seeks total return. The fund invests a large share of its assets in utilities companies. The fund focuses on acquiring securities of firms providing electricity, gas and water services or equipment for these industries. Not more than 40% of its assets are utilized to purchase foreign securities. The utilities mutual fund has a three year annualized return of 18.61%.

Mario J. Gabelli is the fund manager and he has managed this utilities mutual fund since 1999.

Fidelity Advisor Utilities A (FUGAX - MF report) invests the majority of its assets in public utility companies as well as those firms which derive a large share of revenues from related operations. It focuses on acquiring common stocks of both domestic and foreign companies. The utilities mutual fund has a three year annualized return of 17.29%.

The utilities mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.20% compared to a category average of 1.35%.

Vanguard Utilities Index Admiral Shares (VUIAX - MF report) seeks to track the performance of the MSCI U.S. Investable Market Utilities Index. This index consists of companies in the utilities sector regardless of their market capitalization. The utilities mutual fund is non-diversified and has a three year annualized return of 16.83%.

Donald M. Butler is the fund manager and he has managed this utilities mutual fund since 2004.

Invesco Utilities Investor (FSTUX - MF report) invests a large share of its assets in stocks of companies in the utilities sector or related industries. Firms engaged in the production and distribution of gas and electricity as well as those providing telecom services constitutes its major investments. The utilities mutual fund has a three year annualized return of 16.07%.

As of December 2011, this utilities mutual fund held 39 issues, with 5.29% of its total assets invested in Southern Co.

Rydex Utilities (RYAUX - MF report) seeks capital appreciation. The fund invests the majority of its assets in utilities companies whose securities are traded in the US. It focuses on purchasing equity securities and may also invest in derivatives. The utilities mutual fund has a three year annualized return of 17.27%.

The utilities mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.87% compared to a category average of 1.35%.

To view the Zacks Rank and past performance of all utilities mutual funds, investors can click here to see the complete list of funds.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds

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