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Should You Invest in the Fidelity MSCI Utilities Index ETF (FUTY)?

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Designed to provide broad exposure to the Utilities - Broad segment of the equity market, the Fidelity MSCI Utilities Index ETF (FUTY - Free Report) is a passively managed exchange traded fund launched on 10/21/2013.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Utilities - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 13, placing it in bottom 19%.

Index Details

The fund is sponsored by Fidelity. It has amassed assets over $831.40 million, making it one of the larger ETFs attempting to match the performance of the Utilities - Broad segment of the equity market. FUTY seeks to match the performance of the MSCI USA IMI Utilities Index before fees and expenses.

MSCI USA IMI Utilities Index represents the performance of the utilities sector in the U.S. equity market.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.08%, making it the least expensive product in the space.

It has a 12-month trailing dividend yield of 3.22%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Utilities sector--about 99.50% of the portfolio.

Looking at individual holdings, Nextera Energy Inc (NEE - Free Report) accounts for about 14.72% of total assets, followed by Dominion Energy Inc (D - Free Report) and Duke Energy Corp (DUK - Free Report) .

The top 10 holdings account for about 56.64% of total assets under management.

Performance and Risk

Year-to-date, the Fidelity MSCI Utilities Index ETF has lost about -7.29% so far, and is down about -1.89% over the last 12 months (as of 08/20/2020). FUTY has traded between $29.08 and $46.21 in this past 52-week period.

The ETF has a beta of 0.41 and standard deviation of 24.19% for the trailing three-year period, making it a medium risk choice in the space. With about 68 holdings, it effectively diversifies company-specific risk.

Alternatives

Fidelity MSCI Utilities Index ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FUTY is a reasonable option for those seeking exposure to the Utilities/Infrastructure ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Vanguard Utilities ETF (VPU - Free Report) tracks MSCI US Investable Market Utilities 25/50 Index and the Utilities Select Sector SPDR ETF (XLU - Free Report) tracks Utilities Select Sector Index. Vanguard Utilities ETF has $4.04 billion in assets, Utilities Select Sector SPDR ETF has $11.64 billion. VPU has an expense ratio of 0.10% and XLU charges 0.13%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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