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Inflation in Check: 3 Utility Mutual Funds to Buy Now

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Commendable U.S. economic growth, defying slowdowns elsewhere in the world, and solid job additions were expected to lift inflation. And the Fed was expected to tackle the rise in prices of goods and services by raising interest rates. This would have customarily led to an uptick in fixed income yields. Utility stocks, in the meanwhile, better known as bond substitutes, were expected to be affected by this. But, the present scenario is quite the opposite.


After all, inflation has remained relatively contained. U.S. consumer prices increased marginally last month, supporting the case for the Fed to hold off further hiking rates. Meanwhile, core inflation came in at 2.1%. The Fed stated that the central bank will stick to its patient stance on monetary policy as long as core inflation continues to be near 2%.


At the same time, inflation isn’t rising anytime soon as technology giants continue to suppress inflationary pressure. Just look at how Amazon is building pressure on all consumer products. So, with inflation remaining in check, utility stocks have huge room to rally.


3 Best Utility Mutual Funds to Buy Now


Taking utilities’ bullish trend into consideration, it will be prudent to invest in mutual funds with a major holding in such companies. But, why choose mutual funds over stocks? This is because funds reduce transaction costs for investors. Funds also diversify their portfolio without the numerous commission charges that stocks need to bear (read: The Advantages Of Mutual Funds).


Franklin Utilities A1 (FKUTX - Free Report) fund invests the majority of its net assets in the securities of public utilities companies. These are companies that provide electricity, natural gas, water, and communications services to the public. The fund primarily invests in equity securities, which consist mainly of common stocks. Franklin Utilities A1 fund flaunts a Zacks Mutual Fund Rank #2 (Buy).


As of the last filing, Nextera Energy, Dominion Energy and Exelon were the top holdings for FKUTX. The Franklin Utilities A1 fund, managed by Franklin/Temp, carries an expense ratio of 0.74% versus the category average of 1.17%.  Moreover, FKUTX requires a minimal initial investment of $1,000. The fund has three and five-year returns of 11.2% and 9.9%, respectively.


Wells Fargo Utility and Telecommunications A (EVUAX - Free Report) fund invests a large portion of its net assets in common, preferred and convertible preferred stocks and investment grade bonds or convertible debentures of utility (water, gas, electric) and telecommunications companies. Wells Fargo Utility and Telecommunications A fund has a Zacks Mutual Fund Rank #2.


As of the last filing, Visa, Nextera Energy and CMS Energy were the top holdings for EVUAX. The Wells Fargo Utility and Telecommunications A fund, managed by Wells Fargo, carries an expense ratio of 1.14% versus the category average of 1.17%.  Moreover, EVUAX requires a minimal initial investment of $1,000. The fund has three and five-year returns of 11.7% and 7.9%, respectively.


Fidelity Telecom and Utilities (FIUIX - Free Report) fund invests majority of its assets in securities of telecommunications services companies and utility companies. FIUIX invests in domestic and foreign issuers. Fidelity Telecom and Utilities fund possesses a Zacks Mutual Fund Rank #1 (Strong Buy).


As of the last filing, AT&T, Verizon Communications and Nextera Energy were the top holdings for FIUIX. The Fidelity Telecom and Utilities fund, managed by Fidelity, carries an expense ratio of 0.55% versus the category average of 1.17%.  Moreover, FIUIX requires a minimal initial investment of $2,500. The fund has three and five-year returns of 11.5% and 8.3%, respectively.


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