Investing in infrastructure stocks

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

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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 Standard brokerage fee Inactivity fee Markets International
eToro (global stocks)
US$0
US$10 per month if there’s been no login for 12 months
Global shares, US shares, ETFs
Yes
Zero brokerage share trading on US, Hong Kong and European stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
IG Share Trading
$8
$50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares
Yes
$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
Superhero share trading
$5
No
ASX shares, US shares
Yes
Earn up to 15,000 Qantas frequent flyer points when you transfer an exisiting balance or trade. Offer valid for all new and existing Superhero members until 28 February.
Pay zero brokerage on US stocks and all ETFs and just $5 (flat fee) to trade Australian shares from your mobile or desktop.
ThinkMarkets Share Trading
$8
No
ASX shares
No
Limited-time offer: Get 10 free ASX trades ($0 brokerage) when you open a share trading account with ThinkMarkets before 31 December 2021(T&Cs apply). $8 flat fee brokerage for CHESS Sponsored ASX stocks (HIN ownership), plus free live stock price data on an easy to use mobile app.
Bell Direct Share Trading
$15
No
ASX shares, mFunds, ETFs
No
Finder Exclusive: Get 5 free stock trades and unlimited ETF trades until 31 Dec 2021, when you join Bell Direct. T&Cs apply.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
Saxo Capital Markets (Classic account)
$5
No
ASX shares, Global shares, ETFs
Yes
Access 19,000+ stocks on 40+ exchanges worldwide
Low fees for Australian and global share trading, no inactivity fees, low currency conversion fee and optimised for mobile.
HSBC Online Share Trading
$19.95
No
ASX shares, mFunds, ETFs, Bonds
No
Limited-time offer: Join HSBC’s online trading account before 28 February 2022 and HSBC will reimburse you up to $100 on your first 5 trades. Also traders who transfer $50k+ will get a $200 bonus(T&Cs apply).
Make trades online with brokerage fees starting from just $19.95 with an HSBC Online Share Trading account. Plus gain access to complimentary expert research, trading ideas and tools.
CMC Markets Invest
$11
No
ASX shares, Global shares, mFunds, ETFs
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges.
SelfWealth (Basic account)
$9.5
No
ASX shares, US shares
Yes
Trade ASX and US shares for a flat fee of $9.50, regardless of the trade size.
New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.
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Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage is the cost to purchase $1,000 or less of equities without any qualifications or special eligibility. 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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