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 top 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.

American Century Utilities Investor (BULIX - MF report) seeks current income and capital appreciation. BULIX invests the majority 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 mutual fund returned 7.2% in the last one year.

The utilities mutual fund has a minimum initial investment of $2,500 and an expense ratio of 0.67% compared to a category average of 1.27%.

Prudential Jennison Utility A (PRUAX - MF report) invests a lion’s share 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 (IPO) market. The Prudential Jennison Utility A mutual fund is non-diversified and returned 11.1% in the last one year.

As of March 2015, this utilities mutual fund held 63 issues, with 3.94% of its total assets invested in Edison International.

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 invests a minimum of companies from utilities sector. FKUTX focuses on acquiring common stocks of companies. The Franklin Utilities A mutual fund returned 8.8% in the last one year.

John Kohli is one of the fund mangers and has managed this fund since 1998.

To view the Zacks Rank and past performance of all utilities mutual funds, investors can click here to see the complete list of funds.

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. Pick the best mutual funds with the Zacks Rank.