Most of our planet’s surface is covered in water, but the vast majority of it is not drinkable (97% of it is seawater). If we take a close look at how much water is readily available for human use, only about 1% of the global water supply is suitable.
Until recently, water has tended to fly under the radar as an investment.
However, we are currently seeing a global shortage of water along with changing weather patterns. Experts are estimating that up to two-thirds of the world will soon be living in areas without adequate water.
Many people now think that this will translate into a good investment opportunity.
However, water investing is not as straightforward as you might think. The main reason is that access to drinking water is a right in most places so it’s not a commodity you can just buy and hoard.
Let’s take a look at your best options for investing in water.
Options for Investing in Water
Traditionally, water has not been an easy asset to invest in. The two options below are the most popular non-stock/ETF/mutual fund options.
Water rights. Water rights would give you access to water from sources such as lakes, rivers, and underground reserves. You can then charge companies and governments to access your water. However, beware that allocations to water rights can be cut by the government. Also, if there isn’t enough water to go around due to a drought, then you won’t have any water to sell. There are many areas in the United States where water rights have already been over-allocated.
Food. At first this might seem to be an odd way to invest in water, but hear us out. We can all agree that water as a resource is political. The large scale transportation of water is impractical due to both political and physical reasons.
What became clear to investors is that food is actually one of the best ways to invest in water. You can grow food in water-rich areas, and then transport the food for sale in areas without much water. As an example, Michael Burry from The Big Short is one notable trader that invests in farmland in water-rich areas. You can look into investing in farmland directly, or find companies that do this.
Of course, there are also investment products you can purchase that will give you exposure to water. Let’s take a look at those in the next section.
Water ETF’s, Mutual Funds, and Stocks
For those that want easy investments that you can buy in your brokerage account, there are many products available.
Water ETF’s
The companies that these ETF’s invest in are primarily focused on technologies that conserve or purify water.
- Invesco Water Resources ETF (Symbol: PHO). This fund is based on the NASDAQ OMX US Water Index (Index).
- First Trust Water ETF (Symbol: FIW). This fund is based on the ISE Clean Edge Water Index.
- Investo S&P Global Water (Symbol CGW). This fund is based on the S&P Global Water Index.
Water Mutual Funds
Mutual funds tend to have higher fees than ETF’s, but some of these options are more diversified. Water ETF’s have generally done better than water mutual funds. However, If diversification is really important to you, then mutual funds may be a better fit than the previously mentioned ETF’s.
- Calvert Global Water Fund (Symbol: CFWIX). This fund tracks the Calvert Global Water Research Index.
- Fidelity Water Sustainability Fund (FLOWX). This fund aims to invest at least 80% of assets in securities of water sustainability companies.
If you would rather invest directly in a company that deals with the conservation or purification of water, then the following are some good options.
- American Water Works (Symbol: AWK). American Water Works provides water and wastewater services in both the United States and Canada.
- Ecolab (Symbol: ECL). Ecolab provides water, hygiene, and infection prevention solutions worldwide. Its Global Industrial segment offers water treatment and process applications, and cleaning and sanitizing solutions.
- Danaher (Symbol: DHR). Danaher operates through three segments: Life Sciences, Diagnostics, and Environmental & Applied Solutions. The Environmental & Applied Solutions segment offers instrumentation, consumables, software, services, and disinfection systems for water.
So is water a good investment? Maybe. One thing to keep in mind is that the water industry is not a high growth one. The estimated long term growth is only about 4-6% a year. You will have to analyze your own portfolio to see if investing in water is the right move for you.
We are not financial advisors, and no content on this site should not be taken as financial advice. No guarantee can be made if you invest based on the information provided on this blog. We make no warranty of any kind regarding the blog and/or any content, data, materials, information, products or services provided on the blog.
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