When it comes to choosing between Fidelity MSCI Utilities Index ETF and Vanguard Utilities Index Fund ETF, it can be difficult to decide which is the best investment.
Both of these ETFs provide investors with exposure to the utility sector, but there are some key differences between them.
FUTY vs VPU: What Are the Differences?
- FUTY tracks the performance of the MSCI USA IMI Utilities Index, while VPU seeks to follow the performance of the MSCI US Investable Market Index (IMI)/Utilities 25/50.
- Vanguard’s VPU ETF has a slightly higher expense ratio of 0.10%, whereas Fidelity’s FUTY ETF has an expense ratio of only 0.08%. The difference in yearly fee is by 2 basis points.
FUTY vs VPU: How Are They Similar?
- Both ETFs invest in small, medium, and large-cap companies within the utilities sector.
- FUTY and VPU are both tax-efficient, with an average turnover rate of 6%.
- Dividends are paid out to shareholders on a quarterly basis.
FUTY vs VPU: Portfolio Composition
FUTY Top 10 Holdings
|COMPANY||SYMBOL||TOTAL NET ASSETS|
|NextEra Energy Inc.||NEE||13.70%|
|Duke Energy Corp.||DUK||7.22%|
|Dominion Energy Inc.||D||5.83%|
|American Electric Power Co. Inc.||AEP||4.04%|
|Xcel Energy Inc.||XEL||3.35%|
|Public Service Enterprise Group Inc.||PEG||3.01%|
VPU Top 10 Holdings
|COMPANY||SYMBOL||TOTAL NET ASSETS|
|NextEra Energy Inc.||NEE||15.66%|
|Duke Energy Corp.||DUK||6.90%|
|Dominion Energy Inc.||D||5.43%|
|American Electric Power Co. Inc.||AEP||3.81%|
|Xcel Energy Inc.||XEL||3.12%|
|American Water Works Co.||AWK||2.93%|
|Public Service Enterprise Group Inc.||PEG||2.89%|
FUTY vs VPU: Annual Return
|Funds||Fidelity MSCI Utilities Index ETF||Vanguard Utilities Index Fund ETF Shares|
Which is Better, FUTY or VPU?
There are only two differences between FUTY and VPU:
- FUTY is an ETF from Fidelity. VPU is an ETF from Vanguard. The difference here is the fund issuer.
- When it comes to expense ratio, FUTY is a bit cheaper than VPU. Investors can save more money in the long run with the Fidelity Utilities Index ETF.
The Utilities sector is popular among investors who desire regular dividend payments. FUTY and VPU are outstanding options for this type of investment. They focus on stability rather than growth.
What is the theory for why utilities seem to be fairing so poorly lately? I have a modest (1% of my portfolio) holding of Fidelity’s Utility ETF (FUTY), and I’m curious why it seems to be doing so poorly (Duke Energy. NextEra Energy, Southern Co are all big components).
I figured cheap natural gas would have lowered expenses, increasing profits. Coal regulations might balance that out, but it’s not like the companies are becoming less profitable from fundamentals.
Plus, from the fund standpoint, a 4.6% yield isn’t exactly shabby. I don’t have any plans to liquidate out of the position any time soon (in fact, I just added a bit to it). Still, I am curious to know theories behind why the sector as a whole seems to be getting struck.
Utilities could underperform for the next decade and then go to the moon. Or vice versa. We just don’t know. Unless you’re familiar with the ins and outs of the sector, I will stick to the total market or S&P 500.
As utilities are highly regulated, they tend to have little earnings growth, and thus their dividend tends to be the only component of their total return. Therefore they trade similarly to a preferred stock and are very interest rate sensitive.
If I can buy a 4% yielding utility or a 4% treasury bond, which would I choose? The treasury bond.
Utilities were doing well until the fall of last year. The industry is in a period of consolidation. Mergers are taking place, and threats to traditional power generation are gaining momentum. The wind is not an effective source, even though it sounds good. Solar, however, is becoming reasonably efficient at the retail level, though the mega-solar fields are still problematic. This confusion is reflected in the market pricing.
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