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3 Top Utilities Funds to Buy amid the Lockdown

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The coronavirus pandemic may have wreaked havoc on financial markets and induced significant volatility in major U.S. market indices, but investors who wish to protect their investments in this period of crisis still have options provided one knows where to look.

The impact of the novel coronavirus on business in first-quarter 2020 can already be witnessed in earnings and revenues reported so far. Organizations are worried of a disruption in demand for goods and services, mostly from countries such as China, which is one of the largest exporters and importers of goods and services globally.

However, one needn’t worry about demand when it comes to services that are counted among essential services. This is where the utilities sector comes in.

Utilities Are the Ideal Crisis Investment Option

Demand for utilities remains irrespective of the broader market’s volatility. This is because this defensive sector offers necessary services such as electricity, gas and water. Because of this constant demand, utility companies seldom lose their ground despite economic downturns or the current coronavirus-triggered lockdown.

Taking a closer look at the sector’s performance, one may note that the Utilities Select Sector SPDR Fund (XLU) gained 17.2% over the past month, largely propelled by fears over an economic slowdown worldwide because of the pandemic. The companies’ large and stable customer base, practical business model and decent means of profitability make them sustain themselves rather well through times like these.

3 Funds to Buy

We have, therefore, selected three mutual funds that invest in the utilities sector. All of thesefunds carry a Zacks Mutual Fund Rank #1 (Strong Buy). In addition, the minimum initial investment for these funds is within $5,000.

We expect these funds to outperform 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).

AllianzGI Water Fund Class A (AWTAX - Free Report) aims for long-term capital growth. The fund invests the majority of its assets in securities of companies that are represented in one or more of the S&P Global Water Index, the NASDAQ OMX US Water or Global Water Indices or the S-Network Global Water Index. The non-diversified fund mostly invests in common stocks and other equity securities.

This Zacks Sector – Utilities 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 1.36%. The fund has returned 3.3% in the past 3 years. The fund has a minimum initial investment of $1000.

Franklin Utilities Fund Advisor Class (FRUAX - Free Report) aims for capital growth and current income. The fund invests the majority of its assets in securities of utilities companies. These companies could offer electricity, natural gas, water and communications services. FRUAX primarily invests in common stocks of companies.

This Zacks Sector – Utilities 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.

FRUAX has an annual expense ratio of 0.58%, which is below the category average of 1.11%. The fund has returned 5.1% in the past 3 years. The fund has no minimum initial investment.

PGIM Jennison Utility Fund- Class A (PRUAX - Free Report) aims for capital appreciation and current income. The fund invests the majority of its assets in equity and equity-related and investment-grade debt securities of utility companies. PRUAX is a non-diversified fund.

This Zacks Sector – Utilities 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 0.84%, which is below the category average of 1.11%. The fund has returned 5.4% in the past 3 years. The fund has a minimum initial investment of $1000.

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