Investors with a conservative mindset looking for stable current income would do well to consider utilities funds. They 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. This has increased the risk involved but has also generated higher returns.

Below we will share with you 5 buy-ranked utilities mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) and Zacks #2 Rank (Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all utilities mutual funds, investors can click here to see the complete list of funds.

American Century Utilities Investor (BULIX - MF report) invests a large portion of its assets in equities related to the utilities industry. BULIX’s portfolio is constructed based on quantitative and qualitative management techniques. The American Century Utilities Investor fund has a three year annualized return of 7.1%.

BULIX has an expense ratio of 0.67% as compared to category average of 1.18%.

Franklin Utilities A (FKUTX - MF report) seeks capital growth and current income over the long run. FKUTX invests a large chunk of its assets in utilities companies that are involved in providing electricity, natural gas, water, and communications services. FKUTX focuses on acquiring common stocks of companies. The Franklin Utilities A mutual fund has a three year annualized return of 7.3%.

John Kohli is one of the fund managers and has managed FKUTX since 1998.

Putnam Global Telecommunication A invests a major portion of its assets in common stocks of both large and mid-sized companies throughout the world. PGBZX invests in companies involved in the manufacturing or selling of communication services or communication equipment. PGBZX uses derivative instruments for both hedging and non-hedging purposes. The Putnam Global Telecommunication A is non-diversified fund and has a three year annualized return of 12.3%.

PGBZX has an expense ratio of 1.29% as compared to category average of 1.32%.

Prudential Jennison Utility A (PRUAX - MF report) seeks total return. PRUAX invests a lion’s share of equity and debt securities of companies from utilities domain. PRUAX may invest a maximum of half of its assets in non-US securities and may allot more than 5% of its assets in one company. PRUAX uses value investment style in order to select its investments and may participate in the initial public offering market. The Prudential Jennison Utility A mutual fund is non-diversified and has a three year annualized return of 11.1%.

As of July 2015, PRUAX held 60 issues, with 3.69% of its total assets invested in NextEra Energy Inc

MFS Utilities A (MMUFX - MF report) invests a major portion of its assets in equities related to the utilities industry. They are involved in the manufacture, transmission and sale of electric, gas or other types of energy. They are also engaged in telecommunications, including wireless, telephone, and cable. The MFS Utilities A mutual fund has a three year annualized return of 7.9%.

MMUFX has an expense ratio of 0.97% as compared to category average of 1.18%.

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