Utilities are everywhere. They’re used by everyone from the biggest corporation down to single residents. What makes investing in utilities so attractive is that the services being provided are basic. Electricity, natural gas, and water being provided to consumers are so essential that a downward spiraling economy has little to do with the amounts of these services being purchased. Everyone needs electricity, everyone needs water, and people will continue to pay for these services. This makes utilities an appealing sector for investors because buying into them means diversifying a portfolio, potentially cutting down on portfolio risk.
Investing in mutual funds that target utilities is an easy way to break into the sector. Experienced investors may consider purchasing exchange traded fund shares, which are similar to mutual funds and allow for partial ownership in the company. As of the final weeks of 2011, the top ETFs slated to do well in 2012 are ProShares Ultra Utilities, Rydex S&P, First Trust Utilities, Utilities Select Sector, and Vanguard Utilities Index. The best projected stocks of 2012 are Westar Energy, Southern Co., Progress Energy, Pinnacle West Capital Corp., and MGE Energy, all of which have received an A+ rating by The Street.
Utilities often outperform other sectors on the market, so investing in related companies may be a good bet as well. Buy shares in manufacturing companies that provide products to utility companies. Novice investors should remember that investing is not a hobby. This is playing with the big boys, so treat any investments made as a business venture, not something on which money can be thrown away. Don’t view investments as playing the lottery or gambling at the casino. Do some serious research before making any investment since you don’t want to risk what you do have on attempting to learn the ropes.
Beginning investors not experienced in money management should consult professional financial advisers. Investment management software is a great way to learn how to manage investments while gaining the knowledge necessary to break into a volatile endeavor. Investors should understand the most basic accounting principles as well as have an understanding of the stock market industry. An interest in utilities will help better understand the utilities sector, as any other interests will help with subsequent sectors. Practice makes perfect in the investment world, so don’t expect a huge payoff right away. You will most likely lose more than you would like in order to wise up to the market.