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.

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.

Since 2000, the Middle East has seen growth above 5% and has become the second richest part of the emerging world, according to ETF Grind. But Mideast economies were slower to recover in the beginning of 2009 and there were concerns over the ability of the region to pay down debt accumulated in the good years.

Over the long-term period, there are several ETFs that an interested investor could keep an eye on:

• iShares MSCI Turkey Invest Mkt Index (TUR): up 30.9% year-to-date. Turkey’s economy isn’t tied too heavily to oil. It remains dependent on exports to the EU. The country’s industrial sector can profit from its close proximity to oil producers.
• Market Vectors Agribusiness ETF (MOO): up 36.6% year-to-date. Economic develpment and population growth would make the Middle East would effect global food demand more than elsewhere since the region has little arable land. Middle Eastern countries are already securing land for a steady food supply and will need the necessary equipment and supplies.
• PowerShares Global Water (PIO): up 10.8% year-to-date. Needless to say, the region has a scarcity of freshwater. The Middle East has the biggest market for desalinization plants and expensive water engineering projects. PIO holds 29 global water resource firms.
• Market Vectors Gulf States ETF (MES): up 15.4% year-to-date. MES covers Middle Eastern countries that border the Persian Gulf. It is weighted toward finance, real estate and services. Its expense ratio is 1.00, but it is a pure play on oil related economies.
• iShares MSCI Israel Cap Invest Mkt Index (EIS): up 33.5% year-to-date. Israel has reputable pharmaceutical and tech sectors.
• Claymore/Robb Report Global Luxury (ROB): up 13.3% year-to-date. When crude oil rises again, Middle Eastern royals will be swiping their super platinum cards in purchasing luxury goods.
• PowerShares MENA Frontier Countries (PMNA): up 15.9% year-to-date. PMNA is similar to GULF but excludes gulf nations of Qatar, Bahrain, and Oman. It also has a higher expense ratio. It is broadly diversified with Morocco and Egyptian firms. The fund mainly invests in large and mid caps.
• Claymore/Delta Global Shipping (SEA): up 31.8% year-to-date. Recovery in oil prices and Middle East production could translate into strong earnings for global shippers. Crude oil makes up aruond 1/6 of global trade.
• WisdomTree Middle East Dividend (GULF): up 8.4% year-to-date. GULF has a broad market Middle East and North Africa exposure. It has a wider selection of holdings than PMNA or MES, a lower expense ratio, and is dividend weighted rather than capitalization weighted. But the funds competition, GULF is a little low on volume.
• iShares Dow Jones U.S. Oil Equipment Index (IEZ): up 39.7% year-to-date. Major equipment and service companies included in this fund have business in the Middle East. IEZ has outperformed crude oil ETFs and indexes of major integrated oil companies year-to-date.

As always, watch the trend lines to see what actually materializes.

For more stories on the Middle East, visit our Middle East category.

For full disclosure, Tom Lydon’s clients own shares of MOO.

Max Chen contributed to this article.

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