Investors shouldn’t overlook the opportunity to diversify their portfolios through infrastructure stocks and bonds. Infrastructure investments offer earning potential since the world is constantly developing. Recent proposed infrastructure legislation in the U.S. has further cemented the potential of infrastructure investments for the near future.
What Are Infrastructure Stocks and Bonds?
Infrastructure stocks and bonds are investments in private companies and public institutions involved in infrastructure projects. Infrastructure investments are a type of financial asset and can be used to help diversify your investment portfolio. These investments are non-cyclical and provide potential earnings for investors.
Infrastructure stocks are shares in companies within the infrastructure industry. Like other stocks, they are bought and sold through the stock exchange.
Infrastructure stocks are shares in companies that:
- Manufacture and sell construction machinery and equipment
- Produce materials used in infrastructure projects, including steel
- Offer infrastructure logistics
- Provide software and technology to construction, renewable energy, and transportation industries
- Are engineering and construction firms
- Are in the utility sector
- Operate infrastructure networks like ports, railroads, trucking, and airports
- Produce electric vehicles and EV charging stations
- Are multinational corporations with involvement in various industries
Like any other investment, infrastructure stocks aren’t without risks. The value of infrastructure stocks can increase or decrease over time and is vulnerable to changes in the market due to current events.
How Infrastructure Bonds Differ
Infrastructure bonds are issued the same way as other bonds and help finance long-term infrastructure projects. In the United States, they’re also referred to as revenue bonds.
These bonds help finance the construction of new highways, ports, bridges, and railways. The funds for infrastructure bonds are usually for a specific project and have a narrow purpose. They’re often issued for public-private partnership agreements to build new infrastructure.
Infrastructure bonds may provide a more conservative option to investors because they’re backed by government municipalities and not subject to fluctuations in the stock market. These bonds have a longer duration before reaching maturity due to the time needed to complete large infrastructure projects. Unlike stocks, you’ll have to wait years before collecting your earnings.
Ways to Invest in Infrastructure Stocks or Bonds
Infrastructure stocks are bought and sold on stock exchanges. Companies that are looking to raise capital may sell their stocks to buyers. You can buy stocks individually for your portfolio or work with a financial investment firm to develop a portfolio that may include infrastructure stocks and ETFs (Exchange Traded Funds).
Infrastructure bonds are issued by state and local governments and purchased by pension funds, credit and financial institutions, and insurance companies. Individuals interested in infrastructure bonds should contact an investment company to see how they can buy their own bonds.
