4 Utility Mutual Funds to Buy on Trump Tariff Announcements
In recent weeks, market participants have been reeling from the uncertainty brought about by the Trump administration’s trade policies. On April 2, Trump announced a two-step tariff approach by imposing a baseline tariff rate of 10% on certain countries, which will take effect on April 5. On April 9, further tariffs will be added for some countries that the administration considers the worst cases. Stock futures fell after these announcements, and talks of an impending economic slowdown have again taken centerstage.
The utilities sector generally serves as a fallback option for investors during economic downturns, primarily because it is defensive in nature. Even during the 2008 global economic crisis, it held the fort. After the subprime crisis, the Fed cut interest rates to stimulate the economy, and investors flocked to utilities. Regardless of the state of the economy, a household or a business needs its electricity, water, or gas supplies.
After growing 23.3% in 2024, the S&P 500 Utilities Select Sector SPDR (XLU) has been off to a good start in 2025, advancing 5.7% year to date as of April 2. Growth has been driven primarily by the optimism around artificial intelligence (AI) and the energy needed to power it. While nuclear energy and other alternate forms of energy have investors’ attention, a key driver of the sector has also been the upward momentum in electric demand in the United States. Over the next five years, electricity demand in the United States is expected to grow by almost 16%, per Grid Strategies. This is big news for an industry that saw power consumption increase less than 1% annually over the past 20 years.
In addition, utilities are usually considered long-term buy-and-hold options as they regularly declare dividends, and dividend yields on utility stocks are generally higher than those paid by other equities. In this environment, utility stocks provide much-required stability and growth potential. Hence, astute investors should consider such stocks at present.
In this environment, utility mutual funds provide much-required stability and growth potential. Hence, astute investors should consider such funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected four utility mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns and minimum initial investments within $5000, and carry a low expense ratio.
Fidelity Advisor Utilities I FUGIX primarily invests in common stocks of companies principally engaged in the utilities industry and companies deriving a majority of their revenues from their utility operations.
Pranay Kirpalani has been the lead manager of FUGIX since December 2024. Three top holdings for FUGIX are 10.1% in NextEra Energy, 8.2% in Duke Energy and 6.6% in Sempra.
FUGIX’s 3-year and 5-year annualized returns are 12.7% and 11.2%, respectively. Its net expense ratio is 0.73%. FUGIX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
American Century Utilities BULIX primarily invests in equity securities of companies engaged in the utilities industry. BULIX advisors use quantitative and qualitative management techniques as well as risk controls to construct the fund’s portfolio.
Yulin Long has been the lead manager of BULIX since December 2010. Three top holdings for BULIX are 10% in NextEra Energy, 8.6% in Duke Energy and 5.6% in Dominion Energy.
BULIX’s 3-year and 5-year annualized returns are 7% and 6.4%, respectively. Its net expense ratio is 0.65%. BULIX has a Zacks Mutual Fund Rank #1.
Fidelity Select Utilities FSUTX seeks capital appreciation and current income by investing the majority of its net assets in utilities and companies earning revenues from utility operations. FSUTX advisors use fundamental analysis of each issuer’s financial condition and industry position, as well as market and economic conditions, to arrive at their investment decisions.
Pranay Kirpalani has been the lead manager of FSUTX since December 2024. Three top holdings for FSUTX are 10.2% in NextEra Energy, 7.4% in Duke Energy and 6.8% in Sempra.
FSUTX’s 3-year and 5-year annualized returns are 12.9% and 11.4%, respectively. Its net expense ratio is 0.67%. FSUTX has a Zacks Mutual Fund Rank #1.
Franklin Utilities A1 FKUTX invests the majority of its net assets in securities of public utilities companies, which provide electricity, natural gas, water and communications services.
John Kohli has been the lead manager of FKUTX since December 1998. Three top holdings for FKUTX are 10.8% in NextEra, 5.5% in The Southern Company and 5.1% in Edison International.
FKUTX’s 3-year and 5-year annualized returns are 9.6% and 9.1%, respectively. Its net expense ratio is 0.71%. FKUTX has a Zacks Mutual Fund Rank #2.
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This article originally published on Zacks Investment Research (zacks.com).