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3 Utilities Mutual Funds to Consider Amid XLU's Solid 2025
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The S&P 500 Utilities Select Sector SPDR (XLU) has had a quietly solid year, riding a mix of defensive demand, shifting macro policy and structural industry tailwinds that together made utilities one of the steadier corners of the market. After a period of volatility early in the cycle, when rising interest rates and higher borrowing costs squeezed capital-intensive utilities, the sector rebounded once the macro story turned toward easing. This is visible in the ETF’s year-to-date gains. Utilities were among the better-performing defensive ETFs in 2025, with XLU progressing 14.2% as of Dec. 15.
Monetary policy was arguably the single biggest driver. The Fed’s pivot toward rate cuts late in the year reduced the immediate opportunity cost of holding dividend-paying equities versus bonds, improving the sector’s relative appeal to income-seeking investors. The Fed move also softened borrowing costs for issuers. Markets reacted to those cues with renewed interest in utilities after a stretch when risk-on sectors had dominated. Beyond rates, demand has also strengthened. A surprising acceleration in electricity consumption in 2025, driven in part by data-center workloads for AI training and broader electrification trends, has given utilities a tangible growth story.
At the same time, public and state-level pressure around grid modernization and clean-energy transitions has driven regulatory approvals and capital spending that benefit utilities’ long-term earnings trajectories, even if they raise short-term financing needs.
In this environment, utility mutual funds provide much-needed stability and growth potential. Hence, astute investors should consider such funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected three utility mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns and minimum initial investments within $5000, and carry a low expense ratio.
Fidelity Telecom and Utilities (FIUIX - Free Report) primarily invests in common stocks, allocating most of its assets to telecommunications and utility companies, both domestic and foreign. It employs fundamental analysis and evaluates financial health, industry standing and market conditions to select investments. FIUIX is non-diversified.
Pranay Kirpalani has been the lead manager of FIUIX since December 2024. The three top holdings of FIUIX are Verizon (12.3%), Nextera Energy (8.8%) and Constellation Energy (7.5%).
FIUIX’s 3-year and 5-year annualized returns are 15.5% and 12.5%, respectively. Its net expense ratio is 0.66%. FIUIX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
American Century Utilities (BULIX - Free Report) focuses on equity investments in companies within the utilities sector. Its advisors employ a blend of quantitative and qualitative strategies, along with risk management measures, to build and maintain the fund’s portfolio.
Mattia Bacciardi has been the lead manager of BULIX since May 2025. Three top holdings of BULIX are NextEra Energy (8.5%), Duke Energy (8.4%) and Vistra (6.9%).
BULIX’s 3-year and 5-year annualized returns are 11.8% and 9.4%, respectively. Its net expense ratio is 0.65%. BULIX has a Zacks Mutual Fund Rank #1.
Franklin Utilities A1 (FKUTX - Free Report) typically invests the majority of its net assets in public utilities and related service providers, focusing on companies delivering electricity, natural gas, water and communications. Part of its assets is concentrated in the utilities industry. It invests mainly in equity securities, primarily common stocks
John Kohli has been the lead manager of FKUTX since December 1998. Three top holdings of FKUTX are NextEra Energy (8.6%), Entergy (5.6%) and Vistra (5.4%).
FKUTX’s 3-year and 5-year annualized returns are 13.2% and 12%, respectively. Its net expense ratio is 0.71%. FKUTX has a Zacks Mutual Fund Rank #1.
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3 Utilities Mutual Funds to Consider Amid XLU's Solid 2025
The S&P 500 Utilities Select Sector SPDR (XLU) has had a quietly solid year, riding a mix of defensive demand, shifting macro policy and structural industry tailwinds that together made utilities one of the steadier corners of the market. After a period of volatility early in the cycle, when rising interest rates and higher borrowing costs squeezed capital-intensive utilities, the sector rebounded once the macro story turned toward easing. This is visible in the ETF’s year-to-date gains. Utilities were among the better-performing defensive ETFs in 2025, with XLU progressing 14.2% as of Dec. 15.
Monetary policy was arguably the single biggest driver. The Fed’s pivot toward rate cuts late in the year reduced the immediate opportunity cost of holding dividend-paying equities versus bonds, improving the sector’s relative appeal to income-seeking investors. The Fed move also softened borrowing costs for issuers. Markets reacted to those cues with renewed interest in utilities after a stretch when risk-on sectors had dominated. Beyond rates, demand has also strengthened. A surprising acceleration in electricity consumption in 2025, driven in part by data-center workloads for AI training and broader electrification trends, has given utilities a tangible growth story.
At the same time, public and state-level pressure around grid modernization and clean-energy transitions has driven regulatory approvals and capital spending that benefit utilities’ long-term earnings trajectories, even if they raise short-term financing needs.
In this environment, utility mutual funds provide much-needed stability and growth potential. Hence, astute investors should consider such funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected three utility mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns and minimum initial investments within $5000, and carry a low expense ratio.
Fidelity Telecom and Utilities (FIUIX - Free Report) primarily invests in common stocks, allocating most of its assets to telecommunications and utility companies, both domestic and foreign. It employs fundamental analysis and evaluates financial health, industry standing and market conditions to select investments. FIUIX is non-diversified.
Pranay Kirpalani has been the lead manager of FIUIX since December 2024. The three top holdings of FIUIX are Verizon (12.3%), Nextera Energy (8.8%) and Constellation Energy (7.5%).
FIUIX’s 3-year and 5-year annualized returns are 15.5% and 12.5%, respectively. Its net expense ratio is 0.66%. FIUIX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
American Century Utilities (BULIX - Free Report) focuses on equity investments in companies within the utilities sector. Its advisors employ a blend of quantitative and qualitative strategies, along with risk management measures, to build and maintain the fund’s portfolio.
Mattia Bacciardi has been the lead manager of BULIX since May 2025. Three top holdings of BULIX are NextEra Energy (8.5%), Duke Energy (8.4%) and Vistra (6.9%).
BULIX’s 3-year and 5-year annualized returns are 11.8% and 9.4%, respectively. Its net expense ratio is 0.65%. BULIX has a Zacks Mutual Fund Rank #1.
Franklin Utilities A1 (FKUTX - Free Report) typically invests the majority of its net assets in public utilities and related service providers, focusing on companies delivering electricity, natural gas, water and communications. Part of its assets is concentrated in the utilities industry. It invests mainly in equity securities, primarily common stocks
John Kohli has been the lead manager of FKUTX since December 1998. Three top holdings of FKUTX are NextEra Energy (8.6%), Entergy (5.6%) and Vistra (5.4%).
FKUTX’s 3-year and 5-year annualized returns are 13.2% and 12%, respectively. Its net expense ratio is 0.71%. FKUTX has a Zacks Mutual Fund Rank #1.
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Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>