Market Health

The Best Way to Play the Recently Passed Infrastructure Bill

Back in April, I wrote about the need to invest in America’s crumbling infrastructure and how the current administration had just revealed a massive bill to do so.

When President Biden initially announced this, he called it 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.”

But the reality is a little different.

The initial price tag of the bill was more than $2 trillion. But the Infrastructure Investment and Jobs Act that ultimately made it through the U.S. House of Representatives and Senate last week was worth about only $1 trillion.

Still, it was a bipartisan victory for the current administration. And it couldn’t have come at a more critical time in our nation’s development.

Crumbling Infrastructure

A detailed study of America’s infrastructure is conducted every four years by the American Society of Civil Engineers (ASCE). The nation currently has a grade of C-minus.

I’m not surprised. And I’ll bet many of you aren’t either.

Much of America’s infrastructure is at least 50 years old.

In this country, a water main breaks every two minutes, about 43% of our roads are in dire need of repair, and 42% of our bridges are at least 50 years old.

In fact, the ASCE has called more than 46,000 bridges “structurally deficient.” Yet every day, Americans cross them 178 million times.

The cost to repair these bridges alone is $125 billion. And at the rate we’re going, it will take until 2071 to fix all of them.

That’s one of the reasons the current bill is so important. In addition to roads and bridges, we have seaports, railroads and airports that all need upgrades and expansions too.

In Need of Repair

The current bill addresses much of the infrastructure that is in need of dire repair.

America still has water service lines that contain lead. Many of these are in disadvantaged areas that suffer the most. For example, 400,000 childcare centers and schools and 10 million homes still don’t have safe drinking water.

But the recently passed infrastructure act addresses that. It has $55 billion earmarked to improve access to clean water across the country.

And if you live in a rural area, as I do, high-speed internet is not a foregone conclusion. Quite the opposite. There are 30 million Americans just like me who don’t have high-speed access.

But the bill provides $65 billion to expand the broadband infrastructure. This includes 5G fixed wireless access and satellite broadband.

The bill also reauthorizes a number of surface transportation activities for the next five years to address the poor condition of many of our roads and bridges.

In addition, it will invest $110 billion in new funding for repairs and major new projects. It’s the single largest investment in our road network since our interstate highway system was built.

America’s public transit is also in need of an upgrade. We have a multibillion-dollar backlog of repairs to existing infrastructure.

More than 24,000 buses, 200 train stations, 5,000 railcars and thousands of miles of track all need to be replaced.

Thankfully, the bill provides $39 billion to modernize America’s public transit systems.

But that’s just the start. The bill also guarantees $89.9 billion for public transit for the next five years.

That’s the largest investment in the history of U.S. public transit!

The bill includes $17 billion for waterways and port infrastructure upgrades. And airports are getting $25 billion for maintenance and repair backlogs.

It will also provide $66 billion for passenger rail upgrades and improvements. It’s the biggest investment in passenger rail since Amtrak was created 51 years ago. This funding will eliminate Amtrak’s maintenance backlog and will modernize the Northeast rail corridor, along with other areas of the country.

Lastly, the bill includes $7.5 billion to boost the nation’s electric vehicle charging network. That’s enough money to get a good head start on President Biden’s goal of adding 500,000 EV chargers around the country.

The Easiest Way to Invest

All of the different ways to invest in the coming infrastructure boom can be overwhelming for the average investor.

There are hundreds of companies in the infrastructure business. So owning even a fraction of them just isn’t practical.

But getting a diverse exposure to the sector couldn’t be easier. My favorite way to play it is via the Global X U.S. Infrastructure Development ETF (CBOE: PAVE).

This exchange-traded fund contains roughly 100 infrastructure stocks. Industrial companies make up about 70% of the fund, and roughly 21% of the holdings are material stocks. The rest of the fund contains utilities, financials, consumer discretionary and information technology stocks.

It’s up about 36% year to date. It also has a relatively low expense ratio of 0.47%.

It has $5.38 billion in total assets under management, and it pays a small dividend yield of 0.37%.

With the passage of the Infrastructure Investment and Jobs Act, the companies in this fund should see increased business for the rest of the decade. And now is the perfect time for investors to get in.

You should consider making it a part of your portfolio.

Good investing,

Dave

P.S. For two great pick-and-shovel plays that you can invest in to profit off the upcoming infrastructure boom, click here.

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