) -- In 2009, I brought several interesting and timely funds to your attention as best fund choices.

First, there was the diversified growth mutual fund,

ETF Market Opportunity

(ETFOX) - Get Report

, for the second quarter; an international fund,

Fidelity China Region

(FHKCX) - Get Report

, for the third quarter; and

Third Avenue Focused Credit


for the fourth quarter.

My picks performed well, with ETFOX up 17.1% in the second quarter; FHKCX gaining 13.6% in third quarter; and TFCVX has up 3.1% though Dec. 23.

Fidelity Telecom and Utilities Fund

(FIUIX) - Get Report

is my pick for the best mutual fund of the first quarter in 2010.

Bond yields have come down as credit markets returned to normal and

Federal Reserve

policies aimed at restarting the U.S. economic engine depressed rates. While investors have done well from appreciating bond and stock prices, this has reduced yields, and many income investors are stuck in money market or savings accounts earning less than 1%.

Meanwhile, the Federal Reserve is in no rush to raise interest rates. The Fed plans on ending some liquidity programs in February 2010, and it certainly won't hike before then.

Federal Reserve Chairman Ben Bernanke, a student of the Great Depression, will want to see definitive evidence of inflation, but at the moment, there are few signs.

Those investors, anticipating inflation, have bought Treasury inflation-protected securities, stocks and commodities (especially gold), but they are ahead of the economy -- and it's possible that inflation and interest rates will remain low well into 2010.

Already, some investors are moving out of low-yielding assets and into higher-yielding telecom and utility stocks, a move that I expect will grow into a larger trend next year.

Utilities were recently championed by Pimco's Bill Gross in his December outlook, entitled "Anything but 0.01%," in which he argued that tighter regulation on banks, government control of automakers and more regulation in general will lead to utility-like returns for many stocks.

As he put it, "I figure, why not just buy utilities, if that's what the future American capitalistic model is likely to resemble."

The telecom and utility sectors improved over the past month, thanks to many investors finding truth, and income, in that argument. Month to date as of Dec. 22, utilities had the best return among S&P sectors, up 5.82%. Telecom service was third, with a 4.57% return.

While it might seem as though the train has left the station, these sectors still are the two worst year to date: Utilities gained only 7.41% and telecom gained 2.62%, compared to 26.72% for the

S&P 500

index. These sectors have a lot of room to play catch up.

For that reason, these sectors will continue to outperform as the income-hungry search for yield in 2010, and that is why I am selecting Fidelity Telecom and Utilities Fund as my best mutual fund for the first quarter of 2010.

The fund currently holds a mix of companies involved in electricity generation, cable and satellite television, cell towers, telecommunications and even a small holding in

TheStreet Recommends


(GOOG) - Get Report

, 0.56% of assets as of Oct. 30.

Although it started the year with


(T) - Get Report



(VZ) - Get Report

as the top two holdings, accounting for nearly 40% of assets, the latest report shows no trace of either company in the fund.

As of Oct. 30, the top 10 holdings accounted for 58.5% of assets. In the past month, the fund was helped by a top-10 holding in


(CMCSA) - Get Report

, which acquired



General Electric

(GE) - Get Report

. The market responded favorably and shares of Comcast are up about 15%.

Also contributing to recent performance was


(FE) - Get Report

, the No. 1 holding, with 10.1% of assets at the end of October.

The utility, which serves customers in Ohio, Pennsylvania and New Jersey, gained more than 10% in the past month, as did

Constellation Energy Group

( CEG), another top-10 holding.

Fidelity reported that FIUIX's yield was 3.05% as of Dec. 21, and the fund carries a 0.77% expense ratio. Although the fund does not have a short-term trading fee, there is a minimum purchase of $2,500.

-- Written by Don Dion in Williamstown, Mass.

At the time of publication, Dion was long ETF Market Opportunity.

Don Dion is president and founder of

Dion Money Management

, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.