- Date : 04/08/2022
- Read: 4 mins
Infrastructure mutual funds refer to a mutual fund that primarily invests in the stocks of companies that are in the sector of capital goods, construction, metal segments and power.
The most frequent type of mutual fund that we are familiar with is equity mutual funds. However, there are a variety of mutual funds that invest in the private sector. IT sector funds, infrastructure mutual funds, banking sector funds, and so on are some options accessible in the market. Each of these funds focuses on a single specialisation, such as an IT sector fund that exclusively invests in stocks from firms in the IT industry.
Infrastructure mutual funds are another kind of such fund.
Infrastructure mutual funds invest largely in equities of firms involved in the capital goods, construction, metal divisions, and other related industries. These mutual funds are a bit volatile and risky, hence, investing in these mutual funds requires an understanding of the timing of entry and exit.
These funds, like any other funds dedicated to a single category of equities, are deemed risky since they exclusively invest in stocks of a specific type of company. This means that if the sector suffers a setback, the mutual fund will drop.
However, one thing we noticed in the track record of infrastructure funds with the pandemic is that, when compared to other similar funds that are isolated from only one sector, infrastructure mutual funds are significantly safer. This is because, regardless of how the economy is doing, some amount of investment is always made in the infrastructure sector. The track record of infrastructure funds in the past 23 years has shown that the funds that were invested absolutely doubled when it came to returns.
Why Should You Invest in infrastructure mutual funds?
Owing to the massive market rally that took place starting in March 2020, stocks of companies involved in infrastructure have skyrocketed. As a result, mutual funds that have invested in such equities have seen incredible gains. And when we say incredible, we mean that the top five infrastructure mutual funds have absolutely doubled the amount invested in them within the last year.
In 2022, there has been a great emphasis on building the infrastructure of the country in the Union budget 2022, owing to the new PM GatiShakti program that has been launched. This program will be injecting a great amount of financial capital into industries that are related to the creation of roads, railways, mass transport, waterways, and logistics infrastructure. It has been claimed by many mutual fund experts and advisors that due to this capital injection, there is going to be a great amount of growth seen in these sectors and in turn in the stocks of the companies involved. Investing in an infrastructure mutual funds this year would be a good way to get some great returns.
The top 3 infrastructure mutual funds (As of 13 July 2022- Annualized returns)
1. Quant infrastructure fund-direct plan-growth mutual fund.
- 1 year returns: 18.55%
- 3 year returns: 32.46%
- 5 year Returns: 21.75%
- Expense ratio: 0.64%
- AUM: ₹ 539.75 Crs
2.. The second high performing mutual fund is the Invesco India infrastructure fund-direct plan -growth Mutual fund.
- First year returns: 7.6%
- Third year returns: 21.53%
- Fifth year Returns: 14.44%
- Expense ratio: 0.99%
- AUM: ₹ 414.31 Crs
3. The next one is the BOI AXA manufacturing and infrastructure fund-direct plan-growth mutual fund.
- First year returns: 5.09%
- Third year returns: 22.06%
- Fifth year Returns: 13.3%
- Expense ratio: 1.33%
- AUM: ₹ 69.44Crs
Infrastructure mutual funds are expected to develop significantly and provide excellent returns to the future year. So, if you're searching for a short-term investment and are considering a mutual fund for that purpose, infrastructure mutual funds would be ideal.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment advice. You should separately obtain independent advice when making decisions in these areas.