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5 Utility Mutual Funds for Glowing Returns - Best of Funds

The current geopolitical environment is erratic to say the least. With civil wars in Syria and Iraq, a ground offensive in the Gaza Strip, riots in France, the Ukrainian border under dispute, and civilians caught in the crossfire on land and in the air.

Then you add in Economic difficulties in the BRICS and PIGS countries, combined with a sluggish U.S. and UK economic growth, it behooves investors to examine defensive funds that produce income during these tense geopolitical times. This is especially true when the broad market indexes are in record territory, and investors are becoming more and more concerned that the next move for stocks could be on the downside.

Utility Mutual Funds

Utilities are well known defensive stocks that produce solid income for their investors. Traditionally, this segment offers protection against a downward trending market, or when there is world strife that will impact the economy globally.

With the U.S. economy sputtering along over the past few quarters, the Utility Sector has been one of the top gainers. In Q1 2014, the Utility sector showed an 18.0% year over year growth, and Q2 is anticipated to continue this growth trajectory. While not as large as Q1 growth, Q2 estimated year over year growth is still going to be in double digits (11.7%), and continue to produce large growth numbers for Q3 (10.0%), Q4 (17.3%), and then dip to 7.0% growth in Q1 2015.

These are very solid growth levels, and only 1 of 3 total sectors expected to produce double digit growth numbers throughout 2014; Construction and Business Services being the other two.

So how does one capitalize on this amazing double digit growth for the remainder of the year, and solid growth expectations into 2015? Look for Zacks Ranked #1 Utility Mutual Funds.

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Funds to Consider

ProFunds Utilities UltraSector ProFund ( UTPIX ) a Zacks Rank #1, primarily invests in U.S. Utility Companies to approximate the Dow Jones U.S. Utility Stock Index. The fund may invest in equity caps, collars and floors, swaps, ADR's, and options on securities and securities indices. Dividend and capital gains are distributed annually.

The fund is comprised of 72.6% Utilities, and 27.4% Other, with all the major companies like, Duke Energy, NextEra Energy, Dominion Resources, and The Southern Company. As of June 30 th , the fund was delivering a yield of 0.98%, and a year to date return of 26.83%

Past Performance: 1 year 30.85%, 3 years 19.11%, 5 year 19.80%

Fidelity Select Utilities Growth ( FSUTX ) a Zacks Rank #1, typically invests at least 80% of assets in common stocks of companies principally engaged in Utilities Industries, and companies deriving the majority of their revenue from utilities operations. The fund offers dividends and capital gains twice a year in April and December.

The Fidelity Select fund is currently invested in Utilities (83.75%), and the remainder spread between 5 other sectors. Therefore, this fund can withstand a little more negative impact due to its wide diversity of the 16.25% of the fund. The fund has most of the major utility players, including Nextera Energy, Dominion Resources, Sempra Energy, and Verizon Communications. As of June 30 th , the fund was delivering a yield of 1.69%, and a year to date return of 19.85%.

Past Performance: 1 year 30.65%, 3 year 17.05%, 5 year 17.57%.

Fidelity Advisors Utilities Fund A ( FUGAX ) a Zacks Rank #1, is considered a non-diversified fund, because management invests a significant percentage of the fund's assets in a single issuer. Management invests in securities of foreign and domestic issuers. The fund offers dividends and capital gains in December.

The portfolio is weighted with 89% Utilities, 4.5% Technology, and the remainder is spread amongst three other segments. The fund is heavy NextEra Energy, Dominion Resources, Sempra Energy, and OGE Energy. As of June 30 th , the fund posted a yield of 1.51%, and a year to date return of 19.82%,

Past Performance: 1 year 30.08%, 3 year 16.67%, 5 year 17.24%.

Morgan Stanley Global Infrastructure Fund B ( UTLBX ) a Zacks Rank #1, attempts to provide both capital appreciation and current income. The fund invests in common stocks and other equity securities, and investment grade fixed-income securities of companies engaged in the Utility Industry. Income dividends are distributed quarterly, and capital gains are distributed in June and December.

The portfolio is more distributed than our other Utility Funds, with only 36.12% of the fund invested in Utilities. This is due to 'engaged' companies that are not per se in the Utility Industry, but are categorized into a different sector, i.e. suppliers, services, finance, and technology support companies.

As of June 30 th , the fund has produced a yield of 0.71%, and a year to date return of 14.40%.

Past Performance: 1 year 27.62%, 3 year 17.43%, 5 year 17.31%.

Vanguard Utilities Index Fund; Admiral ( VUIAX ) a Zacks Rank #1, seeks to track the performance of a benchmark index that measures the investment return of Utility stocks.

This fund is almost all Utilities, with 97% of the portfolio being Utility companies. The other 3% is divided up between, Finance, Industrials, Oil/Gas, and Other. Obviously, this portfolio holds all the big companies like Duke Energy, NextEra Energy, Dominion Resources, Southern Co, and Exelon Corp. But with all those Utilities you do see a larger yield, currently at 3.03%, and a year to date return of 17.88%.

Past Performance: 1 year 21.97%, 3 year 14.49%, 5 year 14.86%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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