Investing in infrastructure Wondering how to diversify your portfolio, achieve capital growth and earn an income? An investment in infrastructure may be what you’re looking for. It’s helpful to take an active interest in managing your investments and their potential for future performance. Let’s take a look at what infrastructure investments are and how they could add value when it comes to growing your capital and getting a predictable income.
Rapidly developing economies overseas and a growing Australian economy mean demand is strong for infrastructure assets. Access to infrastructure has traditionally been reserved for large institutions, but some infrastructure investment funds now provide access to general investors.
What is an infrastructure investment?
More diversity
Infrastructure encompasses the public systems, services and facilities of a country or region that are necessary for economic or social activity. When you invest in an infrastructure fund, you may be investing in assets such as:
It’s good investment practice to spread risk across your portfolio, so all your eggs aren’t in one basket.
toll roads airports telecommunications assets materials-handling facilities such as docks rail facilities and other transport assets schools, hospitals and aged-care facilities electricity power lines and gas pipelines. Timing is key Now could be a good time to think about investing in infrastructure.
Infrastructure assets are generally not as affected by the factors influencing other asset classes, like shares. As a result, an infrastructure investment could provide diversification and reduce the risk of your investments being susceptible to the same stressors as each other. Listed and unlisted Unlisted infrastructure investments are termed unlisted, because they’re not listed or traded through a stock exchange. One of the results of being unlisted is an inherent lack of correlation with listed investments – and the benefit of low correlation is diversification.
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While investing in infrastructure may provide diversification within a portfolio, combining listed and unlisted infrastructure may further improve diversification and returns. What about performance? Over the past ten years a blend of listed and unlisted infrastructure assets provided returns in excess of 10%; exceeding the performance of Australian and international shares on both return and volatility measures. Among other potential benefits of an investment in infrastructure are: earnings stability access to unique assets returns from capital appreciation and income. It’s important to keep in mind that the returns for individual infrastructure funds will vary depending on the performance and maturity of its assets. Assets in the earlier stages of construction generally bring more risk, greater potential for growth and lower yields. These less mature assets may better-suit younger, more risk-tolerant investors. Mature assets tend to display lower growth and very high yields, which suit investors seeking a stable income over the long-term. Is it for you? Infrastructure investments have the potential to provide a regular income and capital growth over the longer-term. Depending on your needs, certain infrastructure assets may suit you better than others. Make sure you’re on track to reach your goals by speaking with us about infrastructure assets, and the pros and cons of diversifying your portfolio. After all, it's never too early to review your portfolio and reassess your goals. _____________________________ Source: Lucas, P., (June 2012). Infrastructure: Reliable, predictable, stable. AMP Capital. Past performance is not an indicator of future performance.
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INFO: James Smith and Hammock Financial Group Pty Ltd ABN 88 150 832 232 are Authorised Representatives of AMP Financial Planning Pty Limited . Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning Pty Ltd and other companies within the AMP Group will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.
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