Investors are always looking for the right mix of risk and return in a given portfolio; for investors with a longer time frame, and the ability to wait out any market retreats over the coming years, being more aggressive up front can potentially serve an investor well in the long-term, as the higher returns, on average, can translate into a nice retirement nest egg in 30 or 40 years.
For most other investors, however, safety is the name of the game. Earning a satisfactory return with an above-average level of safety is what many retirees or income-focused investors are looking for. As such, many of these investors look at the utilities sector as one which can provide the safety, income, and small capital appreciation their portfolios need for the long-term.
I personally favor the utilities sector at this point in time, due to the long-term relative safety and consistency of utilities combined with a stable and consistent yield which tends to grow over time.
For young investors, having a percentage of a portfolio invested in utilities companies can provide a significant boost down the road, as utilities tend to grow dividends substantially year-over-year, resulting in a yield which is compounded and can grow to be quite substantial in the span of a few decades.
Investors interested in utilities but not sure which companies to focus on may consider the Vanguard Utilities ETF (NYSE:VPU) as a way of gaining exposure to the entire sector in a well-diversified manner, accessing the income and capital appreciation potential of the industry with less idiosyncratic risk related to holding only one or two stocks in a given portfolio.
Invest wisely, my friends.
