What is a Water ETF?

Luke Arthur

The water ETF is a type of financial investment that seeks to capitalize on a potential water shortage in the future. The term "ETF" stands for exchange-traded fund, and with this particular ETF, the fund managers invest in company stocks that deal in the water industry. Investing in a water ETF may provide the investor with flexibility in trading, low costs, and tax efficiency.

A desalination plant can be considered a water ETF in some cases.
A desalination plant can be considered a water ETF in some cases.

An exchange-traded fund is a type of security that is similar to a mutual fund in that each share represents a percentage of a portfolio of a large basket of underlying investments. With the success of the commodity ETF market, the water ETF has emerged as a potentially solid investment for the future. While the planet is not in an immediate danger of running out of water, in the future it could be a bigger problem that will have to be dealt with. Water consumption continues to rise at record levels because the population continues to climb. Adding more demand to a precious natural resource will only make it more valuable in the long run.

A desalination plant may be a promising investment for a water ETF.
A desalination plant may be a promising investment for a water ETF.

The water ETF invests in a basket of water company stocks. There are a number of companies that could be included in this type of investment. For example, this type of ETF could put money into a water purification company and a desalination plant. Putting money into distribution or utility companies could also be another consideration for the water ETF. This type of investment has generally performed well for investors and has provided steady returns.

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One of the advantages of investing in a water ETF is that it provides flexibility for traders. When a trader wishes to purchase shares of a water ETF, he or she can do so through any standard brokerage account. The trader will not have to open a futures account or purchase a futures contract as is necessary when investing in certain other commodities. These funds are traded on the stock exchange, which means that investors can buy and sell them any time that the market is open.

This type of investment also provides tax efficiency and low costs for the trader. The costs of ETFs are generally lower than similar mutual funds. Traders will also not have to pay capital gains taxes very frequently with this type of investment, which can save money in the long run.

A water ETF is a type of financial investment that seeks to capitalize on a potential water shortage in the future.
A water ETF is a type of financial investment that seeks to capitalize on a potential water shortage in the future.

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