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What is Water ETF?

A water ETF is an exchange-traded fund that invests in water-related companies.

How Does Water ETF Work?

An exchange-traded fund (ETF) allow investors to purchase a basket of securities in a single transaction.

There are several water ETFs trading in the stock market. Some water ETFs focus only on specific countries, while others focus on regions or even the entire global market.

For example, the PowerShares Water Resources Portfolio ETF (NYSE: PHO) invests only in American water companies. The PowerShares Global Water Portfolio ETF (NYSE: PIO) invests more globally, as does the Guggenheim S&P Global Water Index (NYSE: CGW). The First Trust ISE Water Index ETF (NYSE: FIW) focuses on waste water and potable water.

Why Does Water ETF Matter?

All humans need water to survive, which makes water a valuable investment opportunity, especially considering that the earth's population is growing, as is its demand for water. Water ETFs tend to be the simplest way for investors to make water-related investments, which can include treatment facilities, water-equipment manufacturers, water distributors, water retailers and companies that operate water sources.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.