2019 Investing Guide for Infrastructure ETFs
Learn More About Infrastructure ETFs and Which Funds to Buy Now
Although President Trump and Democratic congressional leaders may not deliver a big new infrastructure package in the short term, the political and economic pressure to do something about the nation’s crumbling infrastructure remains. This means that now can be an opportune time to check out the best infrastructure ETFs for 2019. These funds typically invest in stocks of companies involved in construction, transportation, utilities, and infrastructure maintenance.
What Are Infrastructure ETFs?
Infrastructure ETFs are exchange-traded funds that invest primarily in stocks of companies that are engaged in building and maintaining the basic physical foundations of the economy—transport, energy, water, and other fundamental systems. These companies may include railroads, utilities, construction companies, and other businesses that may benefit from infrastructure activities. Like most ETFs, infrastructure ETFs typically track the performance of an underlying index.
Most of the infrastructure ETFs on the market today consist of holdings from all over the world, although they are generally concentrated in developed countries, such as the U.S. and Europe. Top infrastructure stocks in 2019 include Enbridge Inc (ENB), NextEra Energy (NEE), and NV5 Global Inc (NVEE).
The Outlook for Infrastructure ETFs in 2019 and Beyond
There is no doubt the U.S. needs to invest in its infrastructure. According to the most recent Infrastructure Report Card, generated by the American Society of Civil Engineers, the U.S. scores a grade of D+. Combine that with the fact that national political leaders have long promised to do something—perhaps even soon—it seems likely the sector will eventually experience significant growth.
With that said, investors thinking about buying infrastructure stocks or infrastructure ETFs should keep in mind that share prices have already seen appreciation in 2019 based upon the expectation for future infrastructure stimulus. If, for some reason, an infrastructure package fails to materialize, infrastructure stocks could see significant price declines.
Also, investors should keep in mind that most infrastructure ETFs invest globally, which means exposure to U.S. domestic infrastructure stocks may be limited to less than half of the total portfolio. However, exposure to various countries and regions around the world can be a good means of building a diversified portfolio while still benefiting from infrastructure growth within the U.S.
Best Infrastructure ETFs to Buy in 2019
The best infrastructure ETFs will have a combination of significant exposure to U.S. infrastructure stocks and low expense ratios.
With that in mind, here are some of the best infrastructure ETFs to buy in 2019:
- SPDR S&P Global Infrastructure ETF (GII): Investors wanting an infrastructure ETF with a long track record, international diversification, and low expenses will like what they see in this fund. GII tracks the primary world benchmark for infrastructure stocks, the S&P Global Infrastructure Index. U.S. infrastructure stocks receive the highest allocation at 37% of the portfolio. The net expense ratio for GII is 0.40% and the current yield is 3.24%.
- Invesco S&P High Income Global Infrastructure ETF (GHII): If you want high yields along with your infrastructure ETF, GHII is a compelling offer from Invesco. With the highest concentration of assets in the utilities and energy sectors, GHII can take advantage of the typical high yields these stocks provide. As for regional exposure, Canada and the U.S. receive the highest allocations, at 29% and 26% of assets, respectively. The current yield for GHII is an impressive 6.29% and the expense ratio is just 0.45%.
- iShares U.S. Infrastructure ETF (IFRA): One of the only ETFs designed specifically to benefit from a potential increase in U.S. infrastructure spending, IFRA concentrates its holdings only on domestic infrastructure stocks. While this concentrated exposure reduces diversification, it increases potential gains, should a large spending package be passed by Congress and signed by President Trump. The only drawback to IFRA is that it’s only been open to investors since 2018. Expenses for IFRA are low at 0.40% and the current yield for the fund is 1.76%.
Infrastructure ETFs can provide opportunities for investors to benefit from increases in government spending on improving infrastructure. However, government spending packages can be difficult to pass, especially in contentious political environments. As with other sector funds, investors are wise to limit exposure to 5%-10% of their portfolio.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.
American Society of Civil Engineers. "2017 Infrastructure Report Card," Accessed Oct. 3, 2019.