Utility ETF

 Utility ETF stands for Utility Exchange Traded Fund.

Exchange traded funds are one of the easiest ways to diversify your portfolio during uncertain times. One of the most conservative investments is the Utility ETF. The track record of the utility industry has been vary stable and usually been on an upwards climb. Usually a Utility ETF will have a dividend that adds to the capital gain of the investment.

Benefits of a Utility ETF

  • Stable and Predictable Trend

  • Cheap Diversification

  • Low Daily Swings

  • Usually Pays a Dividend

  • Can be Leveraged

Disadvantages of a Utility ETF

  • Low Capital Gain vs Individual Stocks

  • May Invest In Coal Companies That Destroy Rivers

  • A Fund May Not Diversify It's Portfolio Well

  • A Rising Price In A Commodity Like Gas Could Lower Dividend Rates

Not all Utility ETFs are based on the power industry. Some ETFs will be based on actual refineries of commodities or water companies. Because of the rise of the world population there will always be a greater need of utilities and ETFs are a great way to invest in the rise of people.

Another forgotten benefit of owning a Utility ETF is that you don't have to cash out your dividend. Some Utility ETFs allow you to reinvest your dividend credit into more stocks in a program called a 'reinvestment plan'. The beauty of a reinvestment plan is that you don't have to pay a brokerage fee each time you reinvest in the same stock.

You can easily place $1,000.00 into a Utility ETF and end up with more then $1,200.00 at the end of year because of the combination of Capital Gain and the reinvestment of the dividend back into more stock of the ETF.

The easiest way to find a list of Utilty ETFs is at Finviz.com

When choosing the the type of Utility ETF to buy it is important to look at the underlying commodity. It is best to invest in energy companies that burn oil when the price of a barrel is vary high. This is because the company will be making less money and it will reflect in the price of the Utility ETF.

Some Utility ETFs are not tied to any one commodity and are more based around industries such as hydro power. To successfully invest in these ETFs it can be important to forecast to see if companies and governments are investing in the industry.

Many people made quiet a bit of money from 2001-2008 when Germany and China had a partnership for subsidizing Solar Panels. The Utility ETFs that had the companies that were getting the solar panels on the cheap rose in value and now are still churning out a dividend.

Remember, any investment can be risky. The biggest risk with a Utility ETF is that a government policy will affect the underlying laws or taxation that affects the companies in an ETF.