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How to Start Investing in Water

By Edited Nov 13, 2013 1 1

What You Need to Know About Buying Water Stocks

It may seem like water is everywhere, but what's not so obvious is that only a small percentage of H2O is suitable for consumption. Maybe you've realized how scarce quality water really is, and then wondered how to get started investing in water. Fortunately, buying water stocks is straightforward, but it does require a long haul commitment to realize true profits. While commodities such as precious metals and oil dominate the headlines due to their rapid growth, water remains little mentioned. However, the coming years may prove it to be one of the commodity market's sleeper hits.

Why Should You Invest in Water?

Commodities typically rise in price when demand or development opportunities surge. Water has both of these factors looming over its future, which makes it an unlikely winner. In fact, its demand for couldn't be higher. Developing nations as well as long established industrial powerhouses are in extreme need of safe, life sustaining liquid to nourish their improving living standards and growing populations.

Meanwhile, dependable water is under intense outside pressure. Pollution, changes in climate, and environmental protection laws are rapidly outstripping availability. Consumers are insisting upon higher quality water too, bringing debates like distilled vs spring water into the public arena. Smart entrepreneurs are stepping up to the challenge, though, by setting up additional plants and distribution businesses.

Still, it feels like a race against time. Even if it's a battle that will ultimately be won through technology and production, building wealth through water is just as possible as seeing its scarcity alone increase, since capital demands will be enormous. Investors are already being summoned to help set up research and development. In this scenario, potential profits could be just as robust as demand.

With pressure from consumer desires, geography, and the environment, it's easy to see why some analysts refer to water as “blue gold.” Books like Steve Hoffmann's Planet Water: Investing in the World's Most Valuable Resource make an almost irrefutable case for the coming fortunes that will be made in the rush to win the war for this necessity. Learning how to start investing in water now allows you to put your own cards on the table, and possibly sprout a small fortune in the process.

How to Buy Water Stocks

The best way to invest in water is through stocks and commodity shares. As with any investment, the name of the game is marginalizing risk while maximizing growth. Diversification is key, since owning many different shares makes it less likely your money will disappear in the event of a corporate disaster or temporary commodity meltdown. Diversified portfolios typically enjoy slower growth than individual stocks, but they are much safer, less volatile, and far easier to set up for the average investor.

Thanks to the rising popularity of water investments, many mutual fund providers have created Exchange Traded Funds (ETFs) encompassing a variety of different water stocks. ETFs are easily bought and sold, and they can be held in a taxable portfolio or a retirement account, just like other funds. The most popular is PowerShares Water Resources Portfolio (PHO), which brings together thirty different stocks.

This PowerShares ETF is an outstanding way for beginners to start investing in water resources. Unlike other funds, which select their constituent parts based on what analysts believe is best, PowerShares takes a balanced approach based on feedback from personal investors. PHO is only marginally actively managed, which helps keep fees low and stability well balanced.

The ETF is generally reviewed and adjusted on a quarterly basis, when PowerShares may dump exceptionally low performing stocks from the fund, and add promising new ones. This also promotes lower fees, working miracles for investors who are already investing with companies like Fidelity and Vanguard, who carry low maintenance costs.

Financial knowledge is more than just power. In this case, it's also money. By understanding how you can get started investing in water stocks through ETFs, you can join the rush for blue gold without consulting a Wall Street guru.

Investing in Water, the World's Most Valuable Natural Resource



Aug 1, 2011 2:51pm
Nice! You make a lot of great points... I had the same idea about the same time -- I invite you to check out my Water investment article if you'd like... all best.
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