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4 Utility Funds to Buy in the Wake of Market Turmoil
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American markets have been rather tumultuous for the past few weeks, owing to a string of factors that have taken a toll on Wall Street. The lingering U.S. trade issues and highly disappointing manufacturing activity are painting a lackluster picture as well. In addition, September’s low consumer confidence level hasn’t helped either.
In such a scenario, mutual funds that invest in sectors such as utilities could expect to gain from the sector’s strength and decent growth. Investing in the utilities sector at this juncture seems prudent.
Utility Among S&P 500’s Top Gaining Sectors YTD
Utility has been one of top three gaining sectors of the S&P 500 Index on a year-to-date basis, despite the ongoing issues that are rattling Wall Street. In fact, the U.S.-China trade war and global economic slowdown have been concerning investors since last year and affected other vulnerable sectors.
But utility has remained strong. The Utilities Select Sector SPDR Fund (XLU) increased 20.4% on a year-to-date basis, behind only Technology and Real Estate which rose 26.3% and 25%, respectively.
A major reason to invest in utility companies in current market conditions is that these are resilient to economic cycles and therefore don’t witness a deterioration in demand. Their large-scale operations and steady balance sheets point toward steady business.
Secondly, since most utility companies operate under the protection of government regulations, these are shielded from new entrants in the market. Thus, these can establish themselves as a dominant entity for steady operations in a particular region.
Our Choices
We have, therefore, selected four mutual funds that invest in utility companies. All of these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging year-to-date returns. Additionally, the minimum initial investment is within $5,000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Utilities Portfolio (FSUTX - Free Report) fund aims for capital growth. The fund invests the majority of its assets in securities of companies in the utility industry. These companies are usually engaged in activities in the power and gas utility industries. FSUTX mostly invests in common stocks.
This Zacks sector – Utilities product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSUTX has an annual expense ratio of 0.78%, which is below the category average of 1.12%. It has returned 16.5% on a year-to-date basis. FSUTX has no minimum initial investment.
PGIM Jennison Utility Fund- Class A (PRUAX - Free Report) aims for total return by combining capital growth and current income. The fund invests the majority of its assets in equity and related securities and investment-grade debt securities of utility companies. PRUAX is a non-diversified fund.
This Zacks sector – Utilities product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PRUAX has an annual expense ratio of 0.83%, which is below the category average of 1.12%. It has returned 20.4% on a year-to-date basis. PRUAX has a minimum initial investment of $2500.
AllianzGI Global Water Fund Class A (AWTAX - Free Report) aims for capital growth over a long period of time. The non-diversified fund invests the majority of its assets in common stocks and other equity securities of companies that are included in one or more of the S&P Global Water Index, Global Water Indices, the NASDAQ OMX US Water or the S-Network Global Water Index.
This Zacks sector – Utilities product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
AWTAX has an annual expense ratio of 1.22%, which is below the category average of 1.37%. It has returned 21% on a year-to-date basis. AWTAX has a minimum initial investment of $1000.
PGIM Jennison Utility Fund Class R (JDURX - Free Report) seeks total return through a combination of capital growth and current income. The fund invests the majority of its assets in securities of utility companies. These securities usually include assets in equity and equity-related and investment-grade debt securities.
This Zacks sector – Utilities product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
JDURX has an annual expense ratio of 1.11%, which is below the category average of 1.12%. It has returned 20.1% on a year-to-date basis. JDURX has no minimum initial investment.
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4 Utility Funds to Buy in the Wake of Market Turmoil
American markets have been rather tumultuous for the past few weeks, owing to a string of factors that have taken a toll on Wall Street. The lingering U.S. trade issues and highly disappointing manufacturing activity are painting a lackluster picture as well. In addition, September’s low consumer confidence level hasn’t helped either.
In such a scenario, mutual funds that invest in sectors such as utilities could expect to gain from the sector’s strength and decent growth. Investing in the utilities sector at this juncture seems prudent.
Utility Among S&P 500’s Top Gaining Sectors YTD
Utility has been one of top three gaining sectors of the S&P 500 Index on a year-to-date basis, despite the ongoing issues that are rattling Wall Street. In fact, the U.S.-China trade war and global economic slowdown have been concerning investors since last year and affected other vulnerable sectors.
But utility has remained strong. The Utilities Select Sector SPDR Fund (XLU) increased 20.4% on a year-to-date basis, behind only Technology and Real Estate which rose 26.3% and 25%, respectively.
A major reason to invest in utility companies in current market conditions is that these are resilient to economic cycles and therefore don’t witness a deterioration in demand. Their large-scale operations and steady balance sheets point toward steady business.
Secondly, since most utility companies operate under the protection of government regulations, these are shielded from new entrants in the market. Thus, these can establish themselves as a dominant entity for steady operations in a particular region.
Our Choices
We have, therefore, selected four mutual funds that invest in utility companies. All of these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging year-to-date returns. Additionally, the minimum initial investment is within $5,000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Utilities Portfolio (FSUTX - Free Report) fund aims for capital growth. The fund invests the majority of its assets in securities of companies in the utility industry. These companies are usually engaged in activities in the power and gas utility industries. FSUTX mostly invests in common stocks.
This Zacks sector – Utilities product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSUTX has an annual expense ratio of 0.78%, which is below the category average of 1.12%. It has returned 16.5% on a year-to-date basis. FSUTX has no minimum initial investment.
PGIM Jennison Utility Fund- Class A (PRUAX - Free Report) aims for total return by combining capital growth and current income. The fund invests the majority of its assets in equity and related securities and investment-grade debt securities of utility companies. PRUAX is a non-diversified fund.
This Zacks sector – Utilities product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PRUAX has an annual expense ratio of 0.83%, which is below the category average of 1.12%. It has returned 20.4% on a year-to-date basis. PRUAX has a minimum initial investment of $2500.
AllianzGI Global Water Fund Class A (AWTAX - Free Report) aims for capital growth over a long period of time. The non-diversified fund invests the majority of its assets in common stocks and other equity securities of companies that are included in one or more of the S&P Global Water Index, Global Water Indices, the NASDAQ OMX US Water or the S-Network Global Water Index.
This Zacks sector – Utilities product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
AWTAX has an annual expense ratio of 1.22%, which is below the category average of 1.37%. It has returned 21% on a year-to-date basis. AWTAX has a minimum initial investment of $1000.
PGIM Jennison Utility Fund Class R (JDURX - Free Report) seeks total return through a combination of capital growth and current income. The fund invests the majority of its assets in securities of utility companies. These securities usually include assets in equity and equity-related and investment-grade debt securities.
This Zacks sector – Utilities product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
JDURX has an annual expense ratio of 1.11%, which is below the category average of 1.12%. It has returned 20.1% on a year-to-date basis. JDURX has no minimum initial investment.
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