The state of the water industry at the moment makes it difficult for investors to single out a few good water stocks, so an ETF can make much more sense. Cheryl Hall for The Dallas Morning News reports that water is the third-largest industry in the world, but it remains fragmented and diverse. (For more information on water, click here).

A market basket approach makes the most sense. ETFs are highly transparent so you know what you’re getting, and the expenses are much lower than a typical mutual fund. You also get diversity within a sector. (Go here to read more about the benefits of ETFs).

The profitability aspect is something else. One could argue that the technology sector is more profitable and proven now, compared to the water industry and water-related ETFs. Iif you feel supply and demand is going to get more attention, you may be a little early, but from a long-term stance, looking at water might be worthwhile.

• PowerShares Water Portfolio (NYSEArca: PHO)

• PowerShares Global Water (NYSEArca: PIO)

• Claymore S&P Global Water (NYSEArca: CGW)

• First Trust ISE Water Fund (NYSEArca: FIW)
  

There are talks about a profit bridge appearing as the stimulus dollars filter through the U.S. economy. Nick Hodge for Energy and Capital reports that $11 billion has been allocated to revamping the U.S. water supply, which could ultimately lead to a profit bridge.

The potential to profit from water comes from many areas, including:

• Drinking water infrastructure and the machines needed to make potable water
• Waste water infrastructure improvements and additions
• State-wide projects and funding for clean drinking water infrastructure projects

About $4 billion has already been delegated to water-related improvements in every state, with another $7 billion in the wings to go toward new water meters ad building more treatment plants.

ETFs are still the best way to access this sector, since trying to choose companies individually could be a time-consuming challenge for most investors.

• PowerShares Water Resources Fud (NYSEArca: PHO): up 18.2% year-to-date



• PowerShares Global Water (NYSEArca: PIO): up 32.5% year-to-date



• First Trust ISE Water Index Fund (NYSEArca: FIW): up 17.5% year-to-date



• Claymore S&P Global Water Index (NYSEArca: CGW): up 26% year-to-date

For more stories about water, visit our water category.

From a supply and demand perspective, demand for water far outweighs supply.  The World Health Organization (WHO) estimates that 1.1 billion people don’t have access to improved drinking water and 2.6 billion live without proper means of sanitation.  To put in into perspective, China accounts for 22% of the world’s population and only 8% of its water, states Loyd Eskildson of Basil and Spice.

Global warming will only add to the world’s water problems because of more flooding in some areas, which will result in the spread of fertilizer and sewage. Other areas will be hit by drought.

For these reasons, some believe that water-related clean-tech companies are the way to go.  One venture capital firm, Kleiner, Perkins, Cauflied & Byers, has made its first major significant investment into Applied Process Technology (APT) which makes water remediation technology that removes agricultural nitrates from well water, reports Camille Rickets of Green Belt.

Europe has been leading the pack in the water space for a while now, while the United States has opted to focus cleantech investing on renewable energy sources, transportation applications and the smart grid.

• PowerShares Global Water Portfolio (PIO):up 19.8% year-to-date

• PowerShares Water Resources Port (PHO): which is up 7.4% year-to-date

• Claymore S&P Global Water Index ETF (CGW): up 18.3% year-to-date

For more stories on water, visit our water category.

Kevin Grewal contributed to this article.

With $15 billion in stimulus money flowing into the $400 billion water market, many are wondering what the ultimate impact is going to be. Water market experts feel that it could make the industry attractive to investors.

Michael Szabo for Reuters reports that other factors supporting a water investment include:

• Growing water scarcity
• Soaring water demand, because of growing populations and higher living standards
• Climate change

Stimulus money in other countries has also been deployed to the water sector, as well. In the past, firms such as General Electric (GE), 3M (MMM) and Siemens (SI) have actively invested in companies that monitor, manage and improve water supplies. Now government stimulus cash is delivering the latest boost.

Meanwhile, cost-effective strategies are being developed through the latest technologies and metering water use, treating waste water for reuse and desalinating sea water are high on the list of possibilities.

ETFs that access these areas of water investment:

• PowerShares Water Resources (PHO): down 4.9% year-to-date

• PowerShares Global Water Portfolio (PIO): up 8.1% year-to-date

• Claymore S&P Global Water Index (CGW): up 4.3% year-to-date

• First Trust ISE Water Index Fund (FIW): down 3.6% year-to-date

For more stories about water, visit our water category.

For investors interested in the water sector, there are many options as far as ETFs are concerned. Getting exposure to companies involved in the conservation and creation of potable water, to the companies that supply the machinery to make this possible are all ways to profit from water, explains Green Investing Now.

As conservation becomes key to create sustainable businesses, the current business model used now may be transformed into a more sustainable production process.

Here are a few of the related ETFs to choose from:

• PowerShares Global Water Portfolio (PIO): expense ratio 0.75%; this ETF is international, with a 30.7% weighting in the United States. It seeks to replicate the performance of the Palisades Global Water Index.

• PowerShares Water Resources Portfolio (PHO): expense ratio 0.66%; this ETF focuses on the provision of potable water, the treatment of water and technology and services directly related to water consumption.

• Claymore S&P Global Water ETF (CGW): expense ratio 0.65%; the companies in this ETF are associated with demand of water, water utilities, infrastructure, equipment, instruments and materials. The index focuses on global developed markets.

• First Trust ISE Water Index Fund (FIW): expense ratio is 0.77%; the index includes the top 36 stocks in the industry and the portfolio is balanced twice a year.

For more stories on water, visit our water category.

One of the more common misunderstandings of investing in the commodity world is what commodity funds actually hold, explains Gary Gordon of ETF Expert.

While ETFs and ETNs have made the investment process easier, it helps to know exactly what you’re investing in to avoid surprises. It also helps to explore all of your options, as well, because in some cases, a fund that invests in commodity producers may be performing better than the commodity itself.

Take Market Vectors Gold Miners (GDX) as an example. Year-to-date, it’s up 9.8%, while SPDR Gold Shares (GLD) is up 5.9%.

The types of commodity funds available include:

• ETFs that invest in companies. Examples of this are the aforementioned GDX. It also includes Market Vectors Steel (SLX), iShares S&P Global Energy (IXC) and Claymore S&P Global Water (CGW). In these funds, you’re investing in companies that are in some way involved in the production of these commodities, rather than futures or the commodities themselves.
• ETFs that hold futures. These include United States Oil (USO), PowerShares DB Gold (DGL) and iShares S&P GSCI Commodity-Indexed Trust (GSG). An advantage to owning these types of funds is the fact that rolling over futures contracts is handled for you.
• ETFs that hold the physical commodity. This includes iShares Silver Trust (SLV) and iShares COMEX Gold Trust (IAU). These ETFs eliminate the hassle and expense of owning and storing a physical commodity.
• Commodity ETNs. Commodity ETNs are the same as other ETNs in that they’re debt obligations backed by the full faith and credit of the issuer. Types of these include iPath Dow Jones-AIG Commodity Index (DJP) and E-TRACS UBS Boomberg CMCI Food ETN (FUD). Look at the underlying index to see how it’s constructed – for example, FUD’s index is a basket of agriculture and livestock futures.

This is by no means a complete listing of all these types of funds. When you’re looking into commodity ETFs, check to see what it holds so you know what you’re getting, how it stacks up performance-wise against other ETFs targeting the same commodity and follow the trend lines using an entry and exit strategy.

For the rundown on the differences between most of the commodity funds, check out this commodity report we ran last month.

For more stories on commodities, visit out our commodity category.

FP Trading Desk for Seeking Alpha explains that water usage is rising all over the world. Changing diet patterns, primarily to a shift toward more meat consumption, doubles the need for water for production relative to a vegetarian diet. Energy production also requires water, and it’s an area that’s projected to see very rapid growth in the next few decades.

There are specific areas that can be accessed through ETFs for investment in the water shortage. Water-related businesses, such as those that work to build up infrastructure, is one area. Another is water filtration, making potable water clean for drinking.

• PowerShares Water Resources (PHO): up 4.5% year-to-date

• PowerShares Global Water (PIO) up 11.3% year-to-date



• Claymore S&P Water (CGW): up 9.6% year-to-date

Earlier-than-expected rapid melting of snowpacks is attributed to dust storms that deposit dirt and sand on snowy mountain tops, which would then allow the darker snow to absorb more heat and sunlight, reports Scott Streater for The New York Times. This has officials worried over water shortages that would occur in late summer.

Thousands of farmers and ranchers depend on slowly melting snowpacks to provide a steady source of water through the year.

The growing problem of dust storms may further grow as grazing, mining and recreational use destroy vegetation and expose soil to winds.

Some seek to introduce native grass or other soil-stabilizing vegetation across regions afflicted. In China, mats were created to try and help stabilize the subsurface and hold down the shifting dunes. Local governments and power companies have also spent millions trying to disburse seed clouds to increase snow on high-elevation mountains.

As we work to find a solution to this problem, and the larger problem of global warming, water industry-focused ETFs could benefit:

• PowerShares Global Water (PIO): up 2.6% year-to-date

• Claymore S&P Global Water (CGW): down 1.3% year-to-date

Max Chen contributed to this article.

A new report from TechKNOWLEDGEy Strategy Group takes a look at the state of the water industry, and there are some opportunities knocking if you look in the right places. TechKNOWLEDGEy Strategic Group (TSG) is a Colorado-based independent investment banking and management consulting firm that evaluates and takes action upon growth strategies within environmental industries.

The group reports that the year 2008-2009 could be looked upon as a turning point within the water industry. There is a changing in the mindset of every U.S. citizen and a transformation in American politics as well as interest in environmental and energy policy.

Among the recent trends in the water industry the report mentions are:

• Water investments will gain attention as the economy falters. Water is beginning to be recognized as an alternative store of value, and water won’t be as badly affected by the crisis as other investments.
• There will be a renewed focus on the environment. There is heightened interest in water and the environment overall, thanks to the Obama administration. The industry is eagerly watching for what affect the stimulus plans will have on the industry over the next few years. Our water infrastructure is dilapidated.
• Water and global food production will get more attention. Food prices are rising quickly, causing many to take a look at how we’re using water. Are we being efficient? Could we be doing better?
• Water to make oil, and vice versa. Where water and energy intersect, there are challenges. It takes water to produce energy, and energy to treat and move water around. Demand for one could cripple the other.
• There could be more consolidation of municipal water and wastewater facilities in the future.

It is no secret that water is an essential part of everybody’s daily life and crucial for our existence. Water has since been recognized as a valuable commodity, and there are broad and specific ETF products for investors to harness the opportunity to invest in this resource. The following ETFs also function as a means for investors to gain exposure to the various roles that water plays: industry function, politics, worldwide health, value within the global financial infrastructure.

The full report can be viewed here.

• PowerShares Global Water (PIO): down 8.5% year-to-date

• Claymore S&P Global Water (CGW): down 9.5% year-to-date

The water industry is calling for safer drinking water standards, source water protection and infrastructure investment, reports Water Tech online. Organization such as American Water Works Association, Association of Metropolitan Water Agencies, National Association of Water Companies, and National Rural Water Association have collaborated to put together a document for issues at hand.

Some of the infrastructure investment and drinking water projects will require legislation and policy and direction of the new president. Obama has expressed that this kind of investment will be a priority for him.

• PowerShares Water Resources Portfolio (PHO), down 48.1% year-to-date

• Claymore S&P Global Water Index (CGW), down 48.4% year-to-date