Forget Savings Accounts and Buy These 2 Utility ETFs Instead

High-yield savings accounts looked like the obvious choice two years ago, when the Fed funds rate sat above 5% and online banks were handing out 5% APY with no strings attached. That window is closing. The Fed funds rate is now 3.75%, down from a high of 4.5% as recently as late 2025, and savings account rates are following it down. The narrowing gap between savings account rates and utility ETF yields has drawn renewed attention to the sector.

Fidelity MSCI Utilities ETF (NYSEARCA:FUTY) and Vanguard Utilities Index Fund ETF Shares (NYSEARCA:VPU) are the two most cost-efficient ways to own the utilities sector. Both track broad indexes of electric, gas, water, and multi-utility companies. Both carry expense ratios that are essentially rounding errors. FUTY charges just 0.084% annually, and VPU comes in at 0.09%. The difference between them is mostly cosmetic.

What These Funds Actually Own

Both funds are heavily concentrated in a handful of names that dominate the U.S. power grid. NextEra Energy is the top holding in FUTY at 12.3%, followed by Southern Co at 6.6% and Duke Energy at 6.3%. VPU holds essentially the same companies in nearly identical proportions. These are regulated utilities, meaning their rates and returns are set by state commissions. That regulatory structure is what makes their dividends predictable over time.

The funds also carry exposure to the newer side of the sector. Constellation Energy and Vistra Corp, both of which operate nuclear and power generation assets tied to the data center buildout, sit in the top ten of each fund. That gives these ETFs a modest growth angle that a pure bond substitute would not offer.

The Yield Math Against Savings Accounts

FUTY yields 2.47% and VPU yields 2.74%. Those figures trail the 10-year Treasury at 4.26% and the Fed funds upper bound. On pure income, a savings account or short-term Treasury still wins. While the dividend yields trail Treasuries, the gap has narrowed as the Fed has cut rates. The case for these ETFs rests on total return, not just the dividend check.

Both funds have delivered strong total returns in the current environment, up roughly 8.5% year to date and 21% over the past twelve months. That kind of price appreciation is simply not available from a savings account, which earns only its stated rate regardless of market conditions — making total return, not just yield, the more relevant comparison for long-term investors. VPU has matched that almost exactly, up 8.5% year to date and 21% over the same trailing year.

The Real Tradeoffs

Utilities are rate-sensitive. When Treasury yields rise, utility stocks tend to fall because investors can get comparable income from bonds without taking equity risk. The 10-year has climbed 0.22% just in the past month, which creates a headwind. If rates move meaningfully higher from here, these funds will feel it in their share prices.

Concentration is the other constraint. VPU holds 98.9% in utilities. There is no buffer from other sectors. A regulatory change, a severe weather event affecting major grid operators, or a shift in energy policy can move the entire fund at once.

For investors choosing between the two, VPU carries $11 billion in assets compared to FUTY’s $2.5 billion, which generally means tighter bid-ask spreads and deeper liquidity. VPU also carries a marginally higher yield, though the expense ratio difference is negligible. In a rising-rate environment, both funds would face price pressure that a savings account would not — a tradeoff investors should weigh against the total return potential these funds have demonstrated.