How to Position Your Portfolio for the Biden Years

In two weeks, Joe Biden will be sworn in as the 46th president of the United States. His campaign slogan of “Build Back Better” and corresponding plan point to economic stimulus and new job opportunities.

If it is enacted in its entirety, it would mean 18.6 million new jobs. In addition, it could raise yearly wages for middle-class American households by $5,000.

Biden’s first focus is to tackle the COVID-19 pandemic. Next, he wants Congress to pass his proposed $2.4 trillion energy and infrastructure plan. His bill is wide-ranging in scope and is meant to upgrade our existing infrastructure.

Regardless of how Georgia’s Senate race ends, there’s a good chance that some form of infrastructure spending will pass in Congress. It’s a bipartisan issue.

No matter what our political views are, we are all too keenly aware that nearly all of America’s infrastructure is in dire straits.

A Failing Grade

Every four years, the American Society of Civil Engineers issues an Infrastructure Report Card for the U.S. The report’s categories include drinking water, hazardous waste, rail, roads, transit and more.

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The last one came out in 2017. And the overall grade for America’s infrastructure was a D+.

Biden’s plan addresses many of the above issues. He intends to spend roughly $900 billion on transportation systems.

Another $490 billion will go toward clean energy. Finally, $700 billion will go toward “Made in America” items, and $300 billion will go toward other infrastructure.

Biden plans to pay for all of this by undoing some of Trump’s tax cuts. He’s also targeting folks whose yearly income is more than $400,000.

But his biggest source of new funds will come from getting all Americans working again. If he actually can create 18 million new jobs, that will mean a lot of new tax revenue at the federal, state and local levels.

Where to Invest

There are many great ways to play Biden’s new plan. But the more than 100 publicly traded companies with ties to the clean energy and infrastructure sectors are too much for the average investor to sort through.

There’s a much easier way to cast a net over both sectors: exchange-traded funds (ETFs).

An ETF is a special security that is a collection of shares of companies. Some track an underlying index. Others track sectors or subsectors.

Let’s assume we want to focus on infrastructure.

There are plenty of ETFs that give shareholders exposure to companies that build and maintain our massive infrastructure – our bridges, highways, railways, waterways, communication networks and electrical power grids.

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Buying shares of one of these ETFs – as opposed to taking individual positions in many companies – is a better way to diversify your portfolio. One investment here gives you a lot more exposure for your money.

One of my favorites is the iShares U.S. Infrastructure ETF (CBOE: IFRA). During 2020, the fund returned 5.48%.

This year, I think its return could be double or even triple that figure. With bipartisan attraction, an infrastructure ETF looks like the perfect low-risk, high-exposure way to invest in the sector.

Now let’s turn our attention to the other half of Biden’s plan: the clean energy sector. We have the same issue here in that there are hundreds of companies to choose from.

My favorite ETF in the clean energy sector is the iShares Global Clean Energy ETF (Nasdaq: ICLN).

This ETF is designed to equal the performance of about 28 companies in the clean energy business. It keeps about 10% of its assets in options, futures and swap contracts.

Its 2020 return was an impressive 136.7%. I think it could do that again in 2021.

Regardless of your political leanings, now is the time to position your portfolio for the Biden years. And the two ETFs mentioned above are an easy way to gain exposure.

Good investing,


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