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Investing in infrastructure stocks

Vital to the success of industrial economies, infrastructure stocks are historically less volatile than other equities.

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Investing in infrastructure stocks can be a lucrative way 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

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.

Investing in utilities stocks

Why invest in infrastructure stocks?

Many 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 $79 trillion by 2040.

In Canada alone, both public and private investment in infrastructure amounted to $85.8 billion in 2018. That same year, the value of Canada’s infrastructure was determined to be $852 billion, or roughly 7.7% of the total national wealth. Highways and road structures typically receive the greater share of infrastructure funding.

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 $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.

Infrastructure stocks

There are plenty of roads to infrastructure investing. You can invest in individual stocks, funds or both.

Stocks

  • Hydro One Limited (TSX: H)
  • H2O Innovation Inc. (TSXV: HEO)
  • Aecon Group Inc. (TSX: ARE)
  • SNC-Lavalin Group Inc. (TSX: SNC)
  • Imperial Oil Limited (TSX: IMO)
  • Power Construction Corporation of China, Ltd (SSE: 601669.SS)
  • HOCHTIEF Aktiengesellschaft (OTC Markets: HOCFF, XETRA: HOT.DE)
  • Tokyo Electric Power Company Holdings, Incorporated (TKE: 9501)
  • Aqua America, Inc. (NYSE: WTRU)
  • AECOM (NYSE: ACM)
  • Waste Management, Inc. (NYSE: WM)
  • TechnipFMC plc (NYSE: FTI)
  • PG&E Corporation (NYSE: PCG)
  • Marathon Petroleum Corporation (NYSE: MPC)

ETFs

These exchange traded funds (ETFs) track the performance of infrastructure companies as well as other types of businesses. Buying into ETFs lets you gain exposure to a wider portion of the infrastructure sector than if you invested in just a handful of companies.

  • Global X U.S. Infrastructure Development ETF (BATS: PAVE)
  • Alerian Energy Infrastructure ETF (NYSEArca: ENFR)
  • iShares Global Infrastructure ETF (NasdaqGS: IGF)
  • FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEArca: NFRA)
  • SPDR S&P Global Infrastructure ETF (NYSEArca: GII)
  • BMO Global Infrastructure Index ETF (TSX: ZGI)
  • iShares Global Infrastructure Index ETF Common Class (TSX: CIF)

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.

Name Product Available Asset Types Stock Fee Option Fee Account Fee ETF Transaction Cost Feature Table description
OFFER
Wealthsimple Trade
Stocks, ETFs
$0
N/A
$0
Free
Get a $50 bonus when you open a Wealthsimple Trade account and deposit and trade at least $150.
Pay no commissions when you trade Canadian stocks and ETFs with Wealthsimple Trade.
BMO InvestorLine
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$9.95
$9.95 + $1.25 per options contract
$0 if conditions met, otherwise $25/quarter
$0 - $9.95
Buy and sell a select group of Canada’s most popular ETFs without paying commissions.

An easy-to-use online trading platform with access to research, tools, and the option to access InvestorLine adviceDirect for additional professional support.
Scotia iTRADE
Bonds, Options, Mutual Funds, ETFs, GICs, International Equities
$4.99-$9.99
$9.99 + $1.25 contract ($4.99 + $1.25 contract if completed 150 trades or more a quarter)
$0
$9.99 ($4.99 if completed 150 trades or more a quarter)
Pay no annual account fees.
Buy, sell and trade ETFs, Equities, Options and more with competitive commissions.
CIBC Investor's Edge
Stocks, Bonds, Options, Mutual Funds, ETFs
$4.95 - $6.95
$4.95 - $6.95 (+$1.25 per contract)
$0 if conditions met, otherwise $100/year
$6.95
$4.95 - $6.95 is applicable for online stock, ETF and option trades only. Pay $4.95 when you qualify as an Active Trader (trade 150+ times per quarter).
An intuitive and easy-to-use platform with access to a variety of tools that help you make smart decisions and trade with confidence.
Interactive Brokers
Stocks, Bonds, Options, ETFs, Currencies, Futures
Min. $1.00, Max. 0.5% of trade value
$1.50 min. per order
$0
Min. $1.00, Max. 0.5% of trade value
Extensive trading capabilities and global investment tracking.
Access market data 24 hours a day, six days a week and invest in global stocks, options, futures, currencies, bonds and funds from one single account.
Questrade
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals
$4.95-$9.95
$9.95 + $1 per contract
$0
Free
Get $50 in free trades when you fund your account with a minimum of $1,000.
Opt for self-directed investing and save on fees or get a pre-built portfolio and take some of the guesswork out.
OFFER
Qtrade Direct Investing
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $8.75
$6.95 - $8.75 + $1.25 per contract
$0 if conditions met, otherwise $25/quarter
$0 - $8.75
Get up to 50 free trades. Be one of the first 100 new Qtrade clients to use the promo code 50FREETRADES and deposit a minimum of $10,000 (or top up to $15,000 to get $150 transfer fees waived). Valid until September 30, 2021.
Qtrade Direct Investing offers low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options. Trade 100 ETFs free of charge and thousands more for $8.75 or lower.
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Bottom line

Infrastructure investments are typically less volatile than other types of investments. But infrastructure networks can be very complex, so it can be uncertain which companies and industries will thrive. Governments sometimes direct and regulate the sector given its importance to the broader economy, which adds yet another layer of uncertainty.

If you’re ready to take the plunge and buy infrastructure stocks, compare stock trading platforms.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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