The US Government Just Dropped An Inflation Hedge Into Investors’ Rounds

infrastructure account mlp

The US House of Representatives has passed a $3.5 trillion budget resolution that could put the country on track for a massive spending package aimed at building and upgrading infrastructure. While lawmakers have yet to present the text for the bill, one thing is certain: The proposal will call on Congress to invest trillions in various industries that will build and upgrade various projects. This means that there will also be many opportunities for investors to take advantage of the influx of public funds. While this article discusses some of the intricacies of investing in infrastructure and how to do it, for more help getting the most out of the infrastructure boom, consider partnering with a Financial Advisor.

Infrastructure and infrastructure investments defined

The House has pledged to vote on Build a better agenda no later than September 27. This legislation includes a $1 Trillion Bill (approved by the Senate in August), which focuses on building and improving roads, water and sewage services, waste management, shipping and energy systems. The house will also prepare an account for the $3.5 Trillion Budget Committee Agreement, which is expected to go beyond physical infrastructure projects and invest in health, education and climate change legislation.

With new opportunities ahead, infrastructure investment investors will be able to put their money into the companies that will bid and win these lucrative government contracts to build roads, improve sewage systems and carry out other infrastructure projects paid for with the $combined infrastructure plan. 4.5 trillion . It goes without saying that these companies could see their total value increase if they win these contracts, and investors, in turn, could see their infrastructure-oriented investments increase in value.

How to invest in infrastructure

infrastructure account mlpinfrastructure account mlp

infrastructure account mlp

There are a number of ways you can invest in the infrastructure boom. The first is simply to find a few companies that you think can get a boost from infrastructure legislation and buy shares in them. Machine and material companies are some of the most common options here. This requires quite a bit of industry knowledge, as well as patience and the ability to sort through investment research to identify the companies most likely to turn up in big money. This method also carries a fair amount of risk: you put all your eggs in one or two infrastructure baskets, so if you guess wrong and these companies don’t see growth, you’re out of luck.

Another popular way to invest in infrastructure is to invest in infrastructure-focused mutual funds and exchange traded funds (ETFs). This way you get a basket of industry investments, selected by a professional investor – so you don’t have to do the research yourself to find the best infrastructure investments. Plus, you’re automatically diversified, so if one of the companies your fund invests in isn’t seeing much growth, you have other investments to keep from losing too much money.

Finally there are master limited partnerships (MLPs), which are companies targeting various infrastructure and infrastructure-adjacent industries. Although they are called partnerships, they are publicly traded in the stock market. These companies also have great tax advantages.

There are many companies in the financial sector that offer infrastructure-focused funds. AN Financial Advisor can help you find the right one, but a few that have received positive press from financial news site Barron’s are the iShares US Infrastructure ETF and the Global X US Infrastructure Development ETF.

Benefits of Infrastructure Investments

infrastructure account mlpinfrastructure account mlp

infrastructure account mlp

The biggest benefit to infrastructure investment right now is based on the industry being poised to see a boom, creating the opportunity for big profits. However, another less obvious benefit can help investors hedge against: inflation. Infrastructure investments involve real assets, and because they are so tied to government policies, there is often legal protection against inflation.

Complementary investments, including other equity sectors and government bonds, are not like that protected against inflation and could be hit hard if the economy goes through a period of high inflation.

If you invest in MLPs (or in funds that invest in MLPs), you can also get many tax benefits.

Bottom Line

There will be a lot of money flowing into the infrastructure sector, subject to legislation being passed in Washington. This means investors can capitalize on the opportunities of an infrastructure boom by investing in the companies poised to win government contracts for these projects across the country. Investing in infrastructure has many benefits, including inflation protection, and can be easily done through infrastructure-focused mutual funds, ETFs, and MLPs.

Investment Tips

  • For help identifying different infrastructure investment opportunities and advice on investment plans, consider partnering with a Financial Advisor. SmartAssets free tool connects you to financial advisors in your area within five minutes. If you are ready to be matched with local advisors who will help you achieve your financial goals, start now.

  • If you choose to invest in infrastructure, make sure you know how it will affect your asset allocation and make adjustments if necessary to maintain the right balance for you.

Photo credit: © iStock.com/Blue Planet Studio, ©iStock.com/Drazen_, ©iStock.com/Tryaging

The mail The US Government Just Dropped An Inflation Hedge Into Investors’ Rounds appeared first on SmartAsset Blog.