• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer

Optimized Portfolio

Investing and Personal Finance

blank space placeholder
  • Beginners Start Here
  • Investing 101
    • Beginners Start Here – 9 Steps to Start Building Wealth
    • What Is the Stock Market? How It Works & How to Invest in It
    • How To Invest in an Index Fund – The Best Index Funds of 2020
    • Portfolio Asset Allocation by Age
    • How to Invest in the S&P 500 Index – 3 of the Best ETFs
    • Why and How To Buy Bonds Online: A Guide for Beginners
    • How To Invest Your Emergency Fund
    • 8 Reasons Why I’m Not a Dividend Income Investor
    • How to Invest Your HSA (Health Savings Account)
  • Lazy Portfolios
    • 60/40 Portfolio
    • All Weather Portfolio
    • Bogleheads 3 Fund Portfolio
    • Couch Potato Portfolio
    • Golden Butterfly Portfolio
    • HEDGEFUNDIE’s Excellent Adventure
    • Permanent Portfolio
    • Warren Buffett Portfolio
    • more…
  • Brokerage Reviews
    • The 5 Best Stock Brokers
    • The 4 Best Investing Apps
    • M1 Finance Review
    • M1 Finance vs. Fidelity
    • M1 Finance vs. Vanguard
    • Stash vs. Robinhood
    • Investing Brokers with the Lowest Margin Rates
    • M1 Borrow Review (How M1’s Margin Loan Works)
  • ETFs
    • VIG vs. VYM – Comparing Vanguard’s 2 Popular Dividend ETF’s
    • The 11 Best Dividend ETFs
    • The 7 Best Small Cap Value ETFs
    • The 5 Best REIT ETFs
    • The 5 Best Tech ETFs
    • The 6 Best ETFs for Taxable Accounts
    • The Best Vanguard Bond Funds – 11 Popular ETFs
    • The Best Vanguard Dividend Funds – 4 Popular ETFs
    • The Best Vanguard Growth Funds – 5 Popular ETFs
    • The 7 Best International ETFs
  • Leverage
    • What Is a Leveraged ETF and How Do They Work?
    • How To Beat the Market Using Leverage and Index Investing
    • The 9 Best Leveraged ETFs
    • Hedgefundie’s Excellent Adventure
    • Leveraged All Weather Portfolio
    • Leveraged Permanent Portfolio
    • Leveraged Golden Butterfly Portfolio
  • Dividends
    • The Best M1 Finance Dividend Pie
    • The 11 Best Dividend ETFs
    • The Best Vanguard Dividend Funds – 4 Popular ETFs
    • VIG vs. VYM – Comparing Vanguard’s 2 Popular Dividend ETF’s
    • 8 Reasons Why I’m Not a Dividend Income Investor
  • Bonds
    • How To Buy Bonds Online: The Ultimate Guide
    • Treasury Bonds vs. Corporate Bonds
    • The Best Vanguard Bond Funds – 11 Popular ETFs
    • The Best Bond Funds Out There – 13 ETFs
    • The 11 Best Treasury Bond ETFs
    • The 5 Best High Yield Bond Funds for Income
    • The 3 Best Corporate Bond ETFs
    • The 3 Best Municipal Bond ETFs
    • The 3 Best TIPS ETFs

The 3 Best Utilities ETFs (1 From Vanguard)

Last Updated: December 14, 2020 No Comments – 2 min. read

Utilities are an underutilized diversifier, dividend income source, and defensive equities sector. Here we’ll review the best Utilities ETFs.

Disclosure:  Some of the links on this page are referral links. At no additional cost to you, if you choose to make a purchase or sign up for a service after clicking through those links, I may receive a small commission. This allows me to continue producing high-quality, ad-free content on this site and pays for the occasional cup of coffee. I have first-hand experience with every product or service I recommend, and I recommend them because I genuinely believe they are useful, not because of the commission I get if you decide to purchase through my links. Read more here.

In a hurry? Here’s the list:

  1. XLU – Utilities Select Sector SPDR Fund
  2. VPU – Vanguard Utilities ETF
  3. FUTY – Fidelity MSCI Utilities Index ETF

Contents

  • Introduction – Why Utilities?
  • The 3 Best Utilities ETFs
    • XLU – Utilities Select Sector SPDR Fund
    • VPU – Vanguard Utilities ETF
    • FUTY – Fidelity MSCI Utilities Index ETF
  • Where to Buy These Utilities ETFs

Introduction – Why Utilities?

Utilities refer to basic, regulated public services like water, natural gas, electricity, and sewage. Investing in the utilities sector provides long-term investors with stable income from dividends, as well as lower volatility and low correlation relative to the total stock market. Utilities also tend to perform well during market downturns, as demand for utilities is relatively constant.

Consequently, overweighting utilities in one’s portfolio may offer a diversification benefit, reducing overall portfolio volatility and risk. For the period 1999 through July 2020, adding a 10% tilt to Utilities did precisely that compared to the total stock market, resulting in higher general and risk-adjusted returns with lower volatility and smaller drawdowns.

utilities

Utilities may even be preferable to REITs and Commodities. Utility operating costs are passed to the ratepayer, using utilities over REITs lets you avoid the idiosyncratic risks associated with real estate markets. Moreover, of all sectors, Utilities are the least explained by the known equity factors that explain the differences in returns between diversified portfolios. I explored this concept further here.

Let’s look at the best Utilities ETFs.

The 3 Best Utilities ETFs

Below are the 3 best Utilities ETFs:

XLU – Utilities Select Sector SPDR Fund

The Utilities Select Sector SPDR Fund (XLU) is the most popular Utilities ETF on the market, with over $11 billion in assets. The fund seeks to track the Utilities Select Sector Index, providing broad exposure to utilities across the U.S. This ETF was established in 1998 and has an expense ratio of 0.13%.

VPU – Vanguard Utilities ETF

Next in popularity is the Vanguard Utilities ETF (VPU), with over $5 billion in assets. The fund seeks to track the MSCI US Investable Market Utilities 25/50 Index, and is comparable to XLU above. This ETF has over 60 holdings and an expense ratio of 0.10%.

FUTY – Fidelity MSCI Utilities Index ETF

Another low-fee option for utilities is the Fidelity MSCI Utilities Index ETF (FUTY), established in 2013. This ETF is the cheapest on the list, with an expense ratio of 0.08%. The fund seeks to track the MSCI USA IMI Utilities Index.

Where to Buy These Utilities ETFs

All these Utilities ETFs are available on M1 Finance. The broker has zero trade commissions and zero account fees, and offers fractional shares, dynamic rebalancing, and a sleek, user-friendly interface and mobile app. I wrote a comprehensive review of M1 Finance here.


Disclosures:  I am long VPU.

Interested in more Lazy Portfolios? See the full list here.

Disclaimer:  While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.

m1 finance get started

Related Posts

  • VIG vs. VYM – Comparing Vanguard’s 2 Popular Dividend ETFs
  • The Best M1 Finance Dividend Pie for FIRE & Income Investors
  • Improving M1 Finance’s Aggressive Portfolio Pie
  • Improving M1 Finance’s Moderately Aggressive Pie
  • The 6 Best Index Funds for Beginners for Long-Term Growth

About John Williamson

Analytical and entrepreneurial-minded data nerd, usability enthusiast, Boglehead, and Oxford comma advocate. I lead the Paid Search marketing efforts at Gild Group. I'm not a big fan of social media, but you can find me on LinkedIn and Reddit.

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Most Popular

Ray Dalio All Weather Portfolio Review, ETF’s, & Leverage

Riding the HEDGEFUNDIE Adventure (UPRO/TMF) on M1 Finance

Golden Butterfly Portfolio Review and M1 Finance ETF Pie

Harry Browne Permanent Portfolio Review, ETFs, & Leverage

Treasury Bonds vs. Corporate Bonds – The Showdown

VIG vs. VYM – Comparing Vanguard’s 2 Popular Dividend ETFs

The 60/40 Portfolio Review and ETF Pie for M1 Finance

Bogleheads 3 Fund Portfolio Review and Vanguard ETFs To Use

The Best M1 Finance Dividend Pie for FIRE & Income Investors

Portfolio Asset Allocation by Age – Beginners to Retirees

The 5 Best Stock Brokers Online for Investing (2021 Review)

The 4 Best Investing Apps for Beginners (2021 Review)

The 7 Best Small Cap Value ETFs (3 From Vanguard)

m1 sidebar

Footer

  • Email
  • Facebook
  • Instagram
  • LinkedIn
  • Pinterest
  • RSS
  • Twitter
  • YouTube
  • Reddit

Amazon Affiliate Disclosure

OptimizedPortfolio.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Email Newsletter

Sign up to receive email updates when a new post is published.

Don't worry, I hate spam too. No ads.

Copyright © 2021 OptimizedPortfolio.com


About - Privacy - Terms - Contact

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Ok, Got ItReject Read More
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled

Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.

Non-necessary

Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.