Water, the source of life, is now becoming a source of portfolio diversification. Like gold and oil, water is a commodity, and it’s becoming increasingly scarce. This scarcity, coupled with the essential role water plays in our lives, creates a unique investment opportunity. Today we’ll guide you through the process of investing in water stocks. We’ll explore the reasons behind the growing interest in water stocks, the various investment options available, and how you can make informed decisions to potentially enhance your financial well-being.
What’s the Value of Water?
Water is one of the most important resources on our planet. Despite 70% of the earth’s surface being covered in water, only about 1% is readily available for human consumption. Rapid industrialization and increasing agricultural use have led to worldwide water shortages. This scarcity, coupled with the essential role water plays in our lives, creates a unique investment opportunity.
The Investment Case for Water
Investing in water stocks is a way to capitalize on the increasing demand for this precious resource. Companies in the water industry, such as utilities, water treatment firms, and equipment makers, stand to benefit from this trend. These companies are seeking to solve the water scarcity problem, and their success could translate into financial gains for investors.
What about Stocks?
Water stocks are stocks of companies whose business is closely tied to irrigation, utilities, water treatment, or other water-related industries. One can invest in these by buying the stocks of individual companies, or by investing in a mutual fund or ETF with high exposure to water stocks.
Recent Developments in Water Legislation
The recent Infrastructure Investment and Jobs Act signed into law by President Biden allocates significant funds for clean drinking water and water infrastructure. This legislation is expected to boost the water industry, making now a potentially opportune time to invest in water stocks.
Exploring Water-Related Investment Opportunities
There are several indexes designed to track various water-related investment opportunities. These indexes provide an easy way to start looking for suitable investment opportunities. Companies from blue-chip stalwart General Electric to small-cap Layne Christensen are all seeking a piece of the water market.
The Growing Demand for Bottled Water
The market for bottled water is growing internationally. Estimates suggest that American per-capita consumption of bottled water increased 61% from 2010 to 2020. This growing demand presents another avenue for investment in the water industry.
Investing in Water Through ETFs and Mutual Funds
If stock picking doesn’t interest you, ETFs, mutual funds, and unit investment trusts (UITs) also provide plenty of opportunities to invest in water. The Invesco Water Resource Portfolio ETF (PHO) is the largest, with a U.S.-centric basket of holdings that tilts toward mid- and smaller-cap companies.
Emerging Investment Opportunities in Water
Based on popularity, new alternatives are slowly emerging. The Allianz Global Water Fund, for example, invests in improving the supply, quality, and efficiency of water resource management. Additionally, the Chicago Mercantile Exchange has tradeable water futures that allow investors to bet on the future price of water.
What’s the Future of Water Investments?
Recent years have seen an upswing in demand for investments that profit from the need for fresh, clean water. If the trend continues, investors can expect to see a host of new investments that provide exposure to this precious commodity and to the firms that deliver it to the marketplace. There are currently numerous ways to add water exposure to your portfolio; most simply require a bit of research. Opportunities to invest in this scarce resource are flowing freely. So, why not dive in and explore the potential of water stocks? Your financial future might just be brighter for it.