These are trying times for the markets, with most of the benchmarks striving to finish their trading days in the green and the mutual funds are not being spared either. While most of the sectors have been failing to attract investors’ attentions since the start of this year, the safe-haven appeal of the utility sector has bucked the trend to some extent. So buying utility mutual funds with strong fundamentals could help investors avoid this negative tone in a less risky manner.

According to Lipper, net outflows for all equity funds came in at around $12 billion for the week ending Jan 6, indicating the market downturn. As a result, the demand for safe-haven securities – such as those from the utility sector – is growing among investors. The broader S&P 500 utility sector – Utilities Select Sector SPDR ETF (XLU) – has attracted nearly $294.6 million of net inflow so far this year.

Though the sector is only up 0.3% in the year-to-date frame, it is the only sector among major S&P 500 domains that finished in the positive territory during this period. Meanwhile, the sector gained nearly 2.6% in past one-month period when the other major sectors registered a minimum loss of 4%.

Before suggesting the appropriate utility mutual funds for your portfolio, let’s find out what is propelling the demand of securities from the utility sector.

Why Utility?

Concerns over China-led global growth issues and a persistent slump in oil prices dampened investor sentiment from the start of 2016, and have dragged down the major benchmarks into the negative territory. Rising expectations about the lift-off of Iranian sanctions, which happened yesterday, dragged down the energy sector, which in turn weighed on the benchmarks on Friday.

While WTI crude plunged by 6.1% to a 12-year low level of $29.42 per barrel, Brent crude declined nearly 0.1% to $31.01 a barrel. The VOLATILITY S&P 500 (VIX) – an important indicator of volatility level – jumped 12.2% on Friday and surged 6.3% in the year-to-date frame.