Investors looking for stable current income would do well to consider utility funds. Such funds are 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. Though this strategy has increased the risk involved, it has also generated higher returns.
The Utilities Select Sector SPDR Fund (XLU) has gained 20.1% over the past year, boosted by fears related to a slowdown in the global economy as well as trade tensions.
Thus, investing in utility mutual funds seems prudent as of now. However, choosing the right mutual funds for your portfolio can become cumbersome. To that end, let us find out which of the two funds discussed below is better.
American Century Utilities Fund Investor Class ( BULIX Quick Quote BULIX - Free Report)
The fund aims for current income and long-term growth of capital and income. The fund invests most of its net assets in equity securities of companies engaged in the utilities industry. The portfolio managers use quantitative and qualitative management techniques along with risk controls to create the portfolio of the fund.
This Sector - Utilities product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 8.3% over the 3-year and 7.9% of the 5-year period. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds,
please click here.
American Century Utilities Fund Investor Class fund, as of the last filing, allocates its assets in the top two major groups; Intermediate Bond and Foreign Bond. Further, as of the last filing, Nextera Energy Inc and Entergy Corp were the top holdings for BULIX.
This Zacks Rank #2 (Buy) was incepted in March 1993 and is managed by
American Cent. BULIX carries an expense ratio of 0.67% and requires a minimal initial investment of $2,500. Wells Fargo Utility and Telecommunications Fund - Class A ( EVUAX Quick Quote EVUAX - Free Report)
The fund invests heavily in common and preferred stocks and investment-grade debt securities of utilities and telecom service providers. EVUAX also invests around 35% of its assets in convertible debentures of utilities and telecom companies.
This Sector - Utilities product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 15.9% over the 3-year and 10.2% of the 5-year period. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds,
please click here.
Wells Fargo Utility and Telecommunications Fund - Class A, as of the last filing, allocates its assets in the top two major groups; Intermediate Bond and Foreign Bond. Further, as of the last filing, Nextera Energy Inc and CMS Energy Corp were the top holdings of EVUAX.
This Zacks Rank #1 (Strong Buy) fund was incepted in January 1994 and is managed by
Wells Fargo. EVUAX carries an expense ratio of 1.14% and requires a minimal initial investment of $1,000. To Conclude
While both BULIX and EVUAX are buy-rated funds, upon having a closer look, we find that the latter is a clear winner. EVUAX is not only cheaper than BULIX, it has a history of providing higher returns. Further, EVUAX has a three-year beta of 0.36, compared with BULIX’s 0.37. So, given the current market scenario, betting on a fund with lower risk and higher returns seems prudent. Therefore, EVUAX clearly outclasses BULIX.
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