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.

Although there are various ways to diversify, Roger Nusbaum, a contributor at TheStreet, follows a Mohammed El-Erian type portfolio with allocations in equity, bonds and real assets. El-Erian is the CEO and co-CIO of PIMCO.

Nusbaum took a look at ETF choices that fit in with El-Erian’s concept:

In the equity portion, he suggests allocating 10% to the PowerShares S&P 500 Buy Write Portfolio (PBP) and 5% to the iShares S&P 600 Small Cap ETF (IJR) which enables investors to benefit from fact that small-cap stocks generally lead the way in the early stages of a stock market cycle.

Additionally, he suggests allocating 10% of a portfolio to the WisdomTree International Large Cap Dividend ETF (DOL) and 5% to the SPDR S&P International Small Cap Index Fund (GWX). In regard to gaining access to emerging markets, Nusbaum suggests looking at the PowerShares BLDRS Emerging Market 50 Index Fund (ADRE).

Next, he suggests adding fixed-income ETFs to a portfolio. In this portion, he states one should look at the iShares Barclays Agency Fund (AGZ) or iShares S&P/Citigroup 1-3 Year International Treas (SHY). PIMCO also offers a PIMCO 1-3 Year U.S. Treasury Index Fund (TUZ).

To wrap up fixed income, he suggests the use of iShares S&P Citigroup International Treasury (IGOV).

In regard to real assets, Nusbaum suggests utilizing the WisdomTree International Real Estate ETF (DRW) the SPDR Gold Trust (GLD) and the PowerShares DB Agriculture Fund (DBA). Additionally, he suggests gaining exposure to infrastructure through the iShares S&P Global Infrastructure Fund (IGF).

Lastly, he states that one should allocate 8% to special opportunities like the PowerShares Water Portfolio (PHO).

In addition to this, we suggest that one utilize a strategy when investing, such as monitoring market trends using the 200-day moving average.  More on the trend following strategy can be found in our new book.

For more stories on portfolio construction and the use of ETFs, visit our ETF education category.

Kevin Grewal contributed to this article.

Water is so valuable because it is absolutely essential for survival and it’s becoming scarce.  What’s even more amazing is the fact that while more than 70% of the Earth’s surface is covered by water, only 3% is fit for human consumption.  Of this 3%, only 1% is readily available for consumption.

As a result of global population increases, rapid industrialization and increasing agricultural use water is rapidly being depleted.  Nations such as India, China, Egypt, Mexico and parts of the United States are witnessing water shortages and are part of the reason that the demand for water is on the rise, states James E. MccWhinney of Investopedia.

From an investor’s perspective, a common index that is looked at is the Palisades Water Index, which is designed to track the performance of companies involved in the global water industry.  This index can be accessed through the PowerShares Water Resources Fund (PHO), up 8.4% year-to-date. PowerShares also provides the PowerShares Global Water (PIO), up 20.8% year-to-date.

A second way to watch the water markets is through the ISE-B&S Water Index which focuses on water distribution and companies that specialize on water technology.  One could take a look at the First Trust ISE Water Index Fund (FIW) which is up 9.8% year-to-date.

A third way to access water is through the S&P Global Water Index, which holds a universe of companies listed on global developed market exchanges. The index is represented by the Claymore S&P Global Water Index (CGW), which is up 15.3% year-to-date.

For more stories on water, visit our water category.

Kevin Grewal contributed to this article.

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.

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

In the 5th World Water Forum, more than 27,000 people from 120 or more countries will meet to discuss ways to adapt the water sector to face climate change, lack of sanitation and dearth of drinking water in many developing countries, along with increase demand for water for basic consumption and in water-intensive energy technologies, reports Lauren Morello for The New York Times.

Historically, water managers looked at records of streamflow, rainfall, and snowpack to determine if communities have enough water for everyday needs. Climate change is changing the regular patterns, which could mean more severe droughts or floods, and it is causing different melting periods for glaciers and snowpacks.

Periods of drought coupled with increased demand for water have been detrimental on all sources of water. The European Environment Agency released a report that states Europe is “living beyond its means” in regards to water use. It is predicted that climate change will create worsening conditions in water sources, along with more frequent and severe droughts across Europe.

These dire conditions could lead to more demand for the companies contained within the underlying indexes of water ETFs. Holdings consist of companies that focus on the provision of potable water, treat water, as well as technologies and services that directly relate to water consumption.

• PowerShares Global Water (PIO): down 0.4% for the last week; up 10.7% in the past two weeks
  

• PowerShares Water Resources (PHO): up 0.6% in the last week; up 4.1% in the last month
  

Max Chen contributed to this article.

Global climate change is exacerbating water scarcity problems around the world, yet few businesses and investors are paying attention to this growing financial threat, according to a report issued by Ceres and the Pacific Institute.

Water is crucial for the global economy – driving every industry from agriculture to electric power to silicon chip manufacturing. Beverage, apparel and tourism also rely on supplies of clean, potable water to survive and grow.

Decreasing water availability is creating trends that cause a decrease in companies’ water allotments for manufacturing, shifts toward full-cost water pricing, more stringent water quality regulations and increased public scrutiny of corporate water practices.

The report concludes that climate change will exacerbate these growing water risks – especially as the world population grows by 50 million people every year. Already, China, India and the western United States are seeing growth limited by reduced water supplies from shrinking glaciers and melting snow caps that sustain key rivers. Meanwhile, agricultural and power plant production have been cut back because of more frequent and more intense heat waves and droughts in large parts of Australia, California and the Southeastern United States.

• PowerShares Water Resource Portfolio (PHO): down 27.3% year-to-date; down 4.6% for one week.