Energy Stocks

How to Invest in Infrastructure’s Long-Needed Boost

I worked hard in school… most of the time.

But I still sometimes dreaded getting my report card.

I knew if I were to bring home a C- or lower in any subject, my parents would have said, “David, you can do better than that!”

The American Society of Civil Engineers just finished grading America’s infrastructure. It does a detailed study every four years.

And it gave the country an overall grade of C-. Yikes.

Few Americans would be surprised. Crumbling, outdated infrastructure is all around us.

But at long last, our infrastructure is getting a much-needed boost. And today, I’ll uncover the best way to play this nationwide makeover.

Congress to the Rescue?

A water main bursts in America every two minutes. It’s estimated that 6 billion gallons of treated water leak out of water mains in the U.S. every day.

Our nation’s roads continue to decline. An astounding 43% of them are in poor or mediocre shape.

We have more than 617,000 bridges in our country. Right now, 42% of them are at least 50 years old. And 46,154 of them are labeled as “structurally deficient.” But that doesn’t keep drivers from making 178 million trips over them every day.

Those are just a few examples. We have deteriorating ports, airports and railroads too.

The World Economic Forum studied global infrastructure and put out a report in 2019. And the U.S. ranked 13th in the world… not so great.

To remain a global economic power, America needs good infrastructure. A country’s economic force can be directly related to the state of its framework and foundation.

Fortunately, a solution to at least some of our infrastructure woes is in the works.

Last week, the current administration announced a massive infrastructure package. President Biden described it as a “once-in-a-generation investment in America unlike anything we’ve seen or done since we built the interstate highway system and the space race decades ago.”

Just imagine what life and transportation were like before our interstate highway system. It gave America a huge leg up on other countries lacking surface highways.

The overall price tag of the plan is $2 trillion. This money would be spent over eight years.

The plan is to pay for it with a corporate tax hike. The corporate tax rate is currently at 21% and would be raised to 28% if the plan passes intact.

Here are some of the big items in the proposal.

Infrastructure Plan Funding Breakdown

What Investors Need to Know

There are plenty of industries in the infrastructure sector. Any investor who wants diverse exposure would likely need to own a dozen or more companies.

But there’s a much easier and more effective way to invest. And that’s via one of the many infrastructure exchange-traded funds (ETFs).

Buying an infrastructure ETF is financial one-stop shopping. And one of my favorites is the Global X U.S. Infrastructure Development ETF (CBOE: PAVE).

Its investment mandate seems to be geared toward the current administration’s plan. This ETF “seeks to invest in companies that stand to benefit from a potential increase in infrastructure activity in the United States.”

It contains about 100 infrastructure stocks. Industrial and materials companies make up about 65% and 21%, respectively, of the portfolio.

It also invests in utilities, financials and information technology. But it’s heavily weighted toward pure infrastructure-related businesses.

Additionally, it has a relatively low expense ratio of 0.47% and a small dividend yield of 0.64%.

America didn’t become the world’s top economic power overnight. This required decades of hard work by millions of Americans.

And the U.S. has required the federal government to continually make big investments in its infrastructure. It built the interstate highway system, dams and waterways, airports, railroads, and port facilities.

Today, a lot of that infrastructure is in dire need of repair or replacement. And the federal government seems poised to once again make a big investment that will pay for itself for decades.

It’s the perfect time for investors to get in on infrastructure. And I can’t think of a better way to expose yourself to this sector than the Global X U.S. Infrastructure Development ETF.

Good investing,

Dave