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All you need to know about Infrastructure Mutual Funds (MF) Investments

Infrastructure mutual funds are mutual funds that invest in the infrastructure sector or its ancillary companies that own, manufacture and operate infrastructure assets or infrastructure projects. Infrastructure is said to be the tangible aspects such as roads, railways, transportation, electricity and so on which are indispensable to the day-to- day functioning of an economy. The state of the infrastructure is instrumental in determining whether the economy is a developed or developing economy. Infrastructure assets include: toll roads, airports, communication assets such as broadcasting and telecom towers, materials-handling facilities such as docks, rail facilities and other transport assets, and utilities such as electricity, power lines and gas pipelines.

The companies invested in these sectors could be directly linked to infrastructure (such as construction or production of capital goods) or indirectly benefit from sectors like banking and metal. Currently these funds are heavily tilted in their investments toward sectors like auto and auto ancillaries, banking and financial services, fast-moving consumer goods, telecom, constructions and projects, and petroleum and gas. We have encapsulated all you need to know about Infrastructure Mutual Fund Investments, to read more on a comparative test on which is the best infrastructure brand to invest click here.

Why Have Infrastructure Funds in Your MF Portfolio?

  • Infrastructure funds are likely to perform better during the next 3 to 5 years (the 2017-18 Budget has provided Rs 241,387 crore for the infrastructure sector [with Rs 131,000 crore for railways]).
  • The present government is bullish on providing infrastructure (like roads, rails and shipping) to boost the economy and also create substantial employment opportunities.
  • The general expectation is that capital expenditure, both from private companies and the Government, is likely to increase in the coming years.
  • The investor market expects falling interest rates: if true, it is bound to provide a fillip to private companies in expanding their capacities.

Some To-Dos

  • Diversify your portfolio and limit your exposure to a particular sector. It's a thumb rule of investment that one must not take too much risk.
  • Keep your exposure to a particular infra sector to 10-15 per cent of the total investment portfolio.
  • By spreading your investments across sectors, you can minimise your risks to a great extent.
  • Invest through a systematic investment plan (SIP) or a systematic transfer plan (STP) to benefit from any likely volatility in the market.

The Not-To- Dos

  • As the wise ones say, always diversify your portfolio and limit your exposure to a particular sector. Hence, desist from investing a lump sum in infrastructure funds.
  • Maximise your investments within a time frame of three to five years (infra funds have given better returns over a three-year investment period than for a five-seven- year period).
  • When the stock markets crashed in 2008, infra funds did not get over the negative impact till 2014. With the new government in office, the sector is picking up. But don't throw caution to the winds.
  • In a growth-oriented economy, infrastructure funds may not get you stable income in the short term but the fund seeks to achieve capital growth in the medium term.

Remember These 3 Points

  1. Take prudent exposure while building up your investment portfolio.
  2. Go for a three-year investment period
  3. Look for a SIP investment mode.
    To understand more on what are the types of mutual funds click here.( types of mutual funds)

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Divya Patwal


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