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.
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.
Compare other products
We currently don't have that product, but here are others to consider:
How we picked theseFinder Score for share trading platforms
We've scored over 30 share trading platforms assessing them for their core features, fees, customer experience and accessibility. Our experts give each platform a score out of 10.
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.
Frequently asked questions
Ask a question
More guides on Finder
-
SpaceX: Where to buy SpaceX shares in Australia
Australian investors can buy SpaceX (SPCX) shares directly via a broker with NASDAQ access, or indirectly through an ETF.
-
Webull Australia review
Webull is a broker with zero-commission trading and a suite of tools to help you invest.
-
Tiger Brokers Australia review
If you're thinking of trading stocks with Tiger Brokers, check out our review of this online broker's fees, safety and pros and cons first.
-
moomoo Australia review
Gain access to the US and Australian markets for less through moomoo share trading accounts.
-
How to invest in the ASX 200
You often hear people talk about whether the ASX200 is up, down or flat. So, why is it such a big deal?
-
How to invest in the S&P 500
Find out the different ways you can invest in the S&P 500 index from Australia.
-
How to buy gold in Australia
If you’re thinking of investing in gold, our guide will explain how and where to buy gold in Australia as well as the pros and cons of investing in it.
-
How to invest in silver in Australia
Here's a guide to your different investment options, the benefits of investing in silver and the possible risks.
-
eToro Australia review
Join the world’s largest social trading network and learn from experienced forex traders with eToro Australia.
-
IG share trading platform review
IG share trading provides access to more than 13,000 stocks on Australian and international markets and is backed by low commissions and 24-hour support.