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. Funds from this category have also benefitted from the widespread economic slowdown globally and stock market volatility.
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. It 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 2% over the 3-year and 5.7% 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, as of the last filing, allocates its assets in the top two major groups; Large Value and High Yield Bond. Further, as of the last filing, Nextera Energy Inc and Entergy Corp were the top holdings for BULIX.
This Zacks Mutual Fund 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. Franklin Utilities Fund Class A1 ( FKUTX Quick Quote FKUTX - Free Report)
The fund aims for capital growth and current income. It invests the majority of its assets in the equity securities of public utilities companies.
This Sector - Utilities product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 6.1% over the 3-year and 8.4% 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.
Franklin Utilities Fund Class A1, as of the last filing, allocates its assets in the top two major groups; Large Value and High Yield Bond. Further, as of the last filing, Nextera Energy Inc and CMS Energy Corp were the top holdings of FKUTX.
This Zacks Mutual Fund Rank #1 (Strong Buy) fund was incepted in September 1948 and is managed by
Franklin/Temp. FKUTX carries an expense ratio of 0.73% and requires a minimal initial investment of $1,000. To Conclude
While both BULIX and FKUTX are buy-rated funds, upon having a closer look, we find that the latter is a clear winner. FKUTX is not only cheaper than BULIX but also has a history of providing higher returns. Further, FKUTX has a three-year beta of 0.47 compared with BULIX’s 0.51. So, given the current market scenario, betting on a fund with lower risk and higher returns seems prudent. Therefore, FKUTX clearly outclasses BULIX.
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