Investing in infrastructure stocks can be a lucrative way to tap into sectors like energy and transportation. But because of government intervention, the pace of infrastructure growth can be uncertain.
Infrastructure stocks are tied to companies and organizations responsible for providing essential services to cities and facilitating the transportation of goods and people. Look at it as the underlying grid that keeps an industrial economy running.
With that said, infrastructure stocks provide exposure to a swath of different companies and sectors. Here are some examples of industries and companies involved in infrastructure:
But infrastructure goes even deeper than that. The above industries are what’s known as hard infrastructure. Soft infrastructure, on the other hand, comprises industries that deliver specific services to people in the communities they serve. Here are some examples:
You can also find infrastructure stocks in the tech space, specifically within information technology. Companies that make servers and other networking equipment essential for the transfer of data are part of the infrastructure industry. They build equipment that’s essential to how many businesses operate and communicate.
Infrastructure is a vast industry that affects several aspects of our everyday lives. And the players in this industry are equally diverse. They include private companies, government agencies and public/private partnerships.
Many investors turn to infrastructure funds because these investments tend to be less volatile than other types of equities in the long run. Historically, these have generated high yields and have remained less responsive to interest rate fluctuations than other investments.
Moreover, global infrastructure investments have outperformed equities by almost 1% and bonds by nearly 4% since 1976. According to the World Economic Forum, worldwide infrastructure investment is projected to reach $79 trillion by 2040.
In Canada alone, both public and private investment in infrastructure amounted to $85.8 billion in 2018. That same year, the value of Canada’s infrastructure was determined to be $852 billion, or roughly 7.7% of the total national wealth. Highways and road structures typically receive the greater share of infrastructure funding.
Moreover, infrastructure is also essential to any modern, functioning economy. Companies need roads to transport goods and fuel to move goods around. People require electricity, heat, water and waste removal to live comfortable lives.
Infrastructure makes all this possible. And its operations also spur job creation.
Because so many infrastructure projects are essential to modern economies, governments tend to take some control. Political disagreement over how to manage certain projects can have a strong impact on infrastructure investments.
For instance, President Donald Trump announced in 2019 his Administration’s plan to invest nearly $1 trillion in infrastructure. But many of these efforts stalled in Congress over political tensions and concerns over the coronavirus.
The latter alone delivered a major blow to the infrastructure sector. Construction and commercial projects slowed or came to a halt as millions of people’s jobs were eliminated.
There are plenty of roads to infrastructure investing. You can invest in individual stocks, funds or both.
These exchange traded funds (ETFs) track the performance of infrastructure companies as well as other types of businesses. Buying into ETFs lets you gain exposure to a wider portion of the infrastructure sector than if you invested in just a handful of companies.
Before you begin trading infrastructure stocks, you’ll need a brokerage account. You have plenty to choose from, so explore your options to find the one that’s right for you.
To make comparing even easier we came up with the Finder Score. Trading costs, account fees and features across 10+ stock trading platforms and apps are all weighted and scaled to produce a score out of 10. The higher the score the better the platform - simple.
Infrastructure investments are typically less volatile than other types of investments. But infrastructure networks can be very complex, so it can be uncertain which companies and industries will thrive. Governments sometimes direct and regulate the sector given its importance to the broader economy, which adds yet another layer of uncertainty.
If you’re ready to take the plunge and buy infrastructure stocks, compare stock trading platforms.
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