Equity Income Mutual Funds

Equity-income funds own stocks of well-established companies that pay dividends. Therefore, equity-income funds tend to be somewhat conservative and show less volatility than stock growth funds. Equity-income funds are well suited for the cautious investor because they tend to not to be too volatile.

Here are seven low-fee equity-income funds offered by well-known and respected mutual funds. These funds have excellent long-term performance records. Be sure to elect to reinvest dividends and capital gains when you set up your account.

The table includes the home page for each fund so look for the mutual fund section on the site. Note the considerable difference in expenses for the seven funds.

Low-fee Equity-Income Mutual Funds
Fund	Symbol	Estimated 10-year Expenses	Comment
Vanguard Dividend Growth Fund	VDIGX	$468	Seeks income and long-term growth of capital and income by investing primarily in stocks of companies with increasing earnings and dividends.
Vanguard Equity Income	VEIPX	$406	Seeks to beat the dividend yield of S&P 500 by at least 50 percent.
Fidelity Equity-Income II Fund	FEQTX	$847	Seeks to beat dividend yield of S&P 500.
Fidelity Equity-Income Fund	FEQIX	$859	Seeks to beat dividend yield of S&P 500.
TIAA-CREF Growth & Income	TIGIX	$524	About 80 percent of its assets are dividend-paying stocks.
T. Rowe Price Equity Income	PRFDX	$883	About 65 percent of its assets are of well-established companies paying above-average dividends.
Schwab Dividend Equity Select	SWDSX	$1,131	Seeks current income from dividends and capital appreciation.
Note: The 10-year estimated expenses are for an initial $10,000 investment and are taken from finance.yahoo.com as of October 30, 2006.

Utility Funds

A utility fund is a specialized type of of equity-income fund that invests in electric, gas and water utilities that usually pay dividends. The problem with the utility funds is their high fees. For example, one of the lowest-fee utility funds is Franklin Utilities A (FKUTX) but its 10-year estimated expenses are $1,350. The Eaton Vance Utilities A (EVTMX) 10-year estimated expenses are $ $1,816. Many other utility funds have these high fees.

Since these funds don't perform significantly better than general equity-income funds, you should avoid most utility funds.

If you want to own utilities to capture their dividends, consider building your own utility fund. You'll have much lower expenses and you can decide what utilities to include.

Posted October 31, 2006.