Utilities funds are an excellent choice for investors seeking a steady income flow. They are also 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. This has increased the risk involved but has also generated higher returns.

Below we will share with you 3 potential utilities mutual funds. Each has earned either a Zacks #1 Rank (Strong Buy) or a Zacks #2 Rank (Buy) as we expect the fund to outperform its peers in the future. To view the Zacks Rank and past performance of all utilities funds, investors can click here to see the complete list of funds.

MFS Utilities A (MMUFX - MF report) invests a lion’s share of its assets in companies whose operations are primarily related to utilities sector. Operations of these companies include manufacturing, production and generation of electric and gas, and operations related to telecommunications domain. The fund focuses on acquiring equities. It may also invest in debt securities which may also include securities below investment grade. The utilities mutual fund returned 10.3% in the last one year.

The utilities mutual fund has a minimum initial investment of $1,000 and an expense ratio of 0.97% compared to a category average of 1.28%.

Meeder Utilities and Infrastructure (FLRUX - MF report) seeks total return with capital growth and income. The fund invests a major portion of its assets in companies from utilities sector throughout the globe. It invests at least 25% of its assets public companies. Also, the fund invests in firms that earn a minimum of half of their revenues by providing services to utility companies. The utilities mutual fund returned 6.3% in the last one year.

The fund manager is Lowell Glaser Miller and he has managed this utilities mutual fund since 1995.

Fidelity Advisor Utilities A (FUGAX - MF report) invests a large chunk of its assets in companies that are either involved in utilities sector or the ones who derive most of their revenues from operations in this sector. The fund focuses on acquiring common stocks. It considers factors including industry and market conditions to invest in companies all over the globe. The non-diversified utilities mutual fund returned 10.3% in the last one year.

As of December 2014, this utilities mutual fund held 36 issues, with 11.83% of its total assets invested in NextEra Energy Inc. (NEE)

About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at www.zacks.com/funds/mutual-funds.