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Investing in infrastructure stocks

Vital to the success of industrial economies, infrastructure stocks are historically less volatile than other equities.

Investing in infrastructure stocks can be a lucrative way for Australian investors to tap into sectors like energy and transportation. But because of government intervention, the pace of infrastructure growth can be uncertain.

What are infrastructure stocks?

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:

  • Mass transit
  • Water supply
  • Sewage management
  • Roads and bridges
  • Electric companies
  • Telecommunication systems
  • Oil rigs and refineries
  • Waste disposal

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:

  • Financial institutions
  • Education systems
  • Law enforcement
  • Governmental bodies
  • Agriculture
  • Healthcare systems

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.

Why invest in infrastructure stocks?

Many Australian 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 $US 79 trillion by 2040.

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.

Risks of investing in infrastructure

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 $US 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.

Infrastructure stocks

There are plenty of roads to invest in infrastructure in Australia. You can invest in various funds and individual stocks.

Compare trading platforms

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.

Name Product AUFST Price per trade Inactivity fee Asset class International
eToro
Exclusive
eToro
US$2
US$10 per month if there’s been no log-in for 12 months
ASX shares, Global shares, US shares, ETFs
Yes
Exclusive: Get 12 months of investment tracking app Delta PRO for free when you fund your eToro account. T&Cs apply.
Trade stocks, commodities and currencies from the one account and get access to social trading.
CMC Invest
Finder Award
CMC Invest
$0
$0
ASX shares, Global shares, Options trading, US shares, ETFs
Yes
$0 brokerage on US, UK, Canadian and Japanese markets (FX spreads apply).
Trade over 45,000 shares and ETFs from Australia and 15 major global markets. Plus, buy Aussie shares or ETFs for $0 brokerage up to $1,000 (First buy order of each security, each day - excludes margin loan settled trades).
Tiger Brokers
Finder AwardExclusive
Tiger Brokers
US$1.99
$0
ASX shares, Global shares, Options trading, US shares, ETFs
Yes
Finder exclusive: Get 10 no-brokerage US or ASX trades in the first 180 days, plus US$30 NVDA shares (+US$30 TSLA shares ) when you deposit AU$2000 or more. Get 7% p.a. on uninvested cash for 30 days. T&Cs apply.
Trade US, Asian and CHESS-sponsored ASX stocks and US options.
Moomoo Share Trading
US$0.99
$0
ASX shares, Global shares, Options trading, US shares, ETFs
Yes
Finder exclusive: Unlock up to AUD$4,000 AND US$4,000 in $0 brokerage over 60 days. T&Cs apply.
Trade US, Asian and CHESS-sponsored ASX stocks and get access to social trading
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Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

Bottom line

Infrastructure helps industrial economies stay afloat. But because infrastructure networks can be very complex, there is uncertainty over which companies and industries will thrive.

Nonetheless, infrastructure investments historically have remained less volatile than other equities. Because infrastructure is vital to many economies, governments can play a large role in regulating certain sectors. That adds another layer of uncertainty.

If you’re interested in taking a stab at infrastructure stocks, compare trading platforms.

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