Investing in infrastructure mutual funds can be rewarding and risky. Infrastructure development plays a pivotal role in a country’s growth, and India’s focus on enhancing its infrastructure has led to the emergence of infrastructure mutual funds as a good investment avenue. These funds offer investors exposure to various sectors like transportation, energy, communication, and more. However, like any investment, infrastructure mutual funds come with their own set of risks and opportunities.
There are many infrastructure mutual funds available to choose from. However, you must carefully consider the below factors, in general, before investing in one.
Table of contents [Show]
Returns
Infra projects are usually long-term contracts that can deliver stable returns. But, political instability or government rules and regulations can impact its performance.
Income
Many infra-assets generate and deliver dividends as income, whereas some are often not easily tradable, making it difficult to liquidate your holdings immediately when needed.
Long-term gains
Since building new infrastructures, such as flyovers, highway extensions, extension of rail lines, airports, upgrading communication systems, and maintaining the existing infrastructures happens with a long-term view, it is generally safe to invest in infra funds.
Volatility
Infra funds perform well when the economy booms and many companies catering to the infra sector bag big projects. At the same time, they can turn riskier when the economy goes down, and the government can’t spend much to take care of its country’s infrastructure.
Diversification
Infra funds usually diversify their investments into sectors like transportation, communications, and so on, thus helping reduce risk. At the same time, your returns can take a hit due to challenges like delays, acts of God, cost escalations, etc.
Remembering these, you must regularly monitor your investment in mutual funds. Please do not make it a habit of reviewing your mutual fund portfolios daily or weekly, as doing so frequently will not help.
It is a good practice to consult an investment expert before making investment decisions if you are not an expert yourself.
