In the investment world, when a commodity is limited, you can potentially invest and make money, especially as the items become scarcer. Of course, this applies to things like precious metals, but given our increasing global warming and the migration of people to the desert Southwest of the United States, it also applies to water. So, if you’re looking for the next hot commodity, you may want to invest in water rights.
How to Invest in Water Rights
If you’d like to invest in water rights, you have several choices:
Stocks
One way is to invest in companies using technology to fight against the water shortage. According to US News & World Report, these companies are doing that and might make good stock picks:
- American Water Works Co. Inc. (ticker: AWK)
- Roper Technologies Inc. (ROP)
- Danaher Corp. (DHR)
- Ecolab Inc. (ECL)
- Tetra Tech Inc. (TTEK)
- Ferguson PLC (FERG)
- Pentair PLC (PNR)
Exchange-Traded Funds (ETFs)
Exchange-traded funds (ETFs) are an excellent way to diversify your portfolio and reduce overall risk. Water ETFs invest in companies involved in purifying and distributing water.
According to Investopedia, the following three are the best ETFs to invest in:
First Water Trust ETF (FIW)
Investopedia states, “The index is composed of exchange-listed companies deriving a substantial portion of their revenue from the potable and wastewater industry. . .More than 86% of the portfolio is allocated to three sectors: industrials, utilities, and healthcare.”
While this ETF was down in 2022 by 15.7 percent, the following three years, 2018-2021, it gained between 21.13 percent and 37.37 percent.
Invesco Water Resource ETF (PHO)
According to Invesco.com, “The Invesco Water Resources ETF is based on the NASDAQ OMX US Water Index.” This ETF has allocated more than 50 percent in the following three industries: machinery, water utilities, and life science tools and services. The rest is spread among chemicals, software, and others.
Like the First Water Trust ETF, Invesco Water Resource was down 14 percent in 2022 but had three good years in 2019-2021 with annual returns from 20.84 percent to 37.57 percent.
Invesco S&P Global Water Index ETF (CGW)
Invesco.com states, “The Invesco S&P Global Water Index ETF is based on the S&P Global Water Index.” The allocation for this fund is 90 percent industrials and utilities.
As the final ETF, Invesco S&P Global Water Index had a bit steeper loss in 2022 than the other two ETFs (22 percent) and didn’t have quite so high of a return in 2019-2021. In those years, the lowest return was 15.42 percent, and the highest was 34 percent.
Final Thoughts
According to the Environmental Protection Agency (EPA), only “one percent of Earth’s water [is] available to us for our daily water supply needs.” Meanwhile, our global temperature is rising, and the world’s population, currently at nearly 8 million, continues to grow. All of these factors are making water more scarce, which provides an excellent opportunity for a savvy person to invest in water rights.
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