Water ETFs are the exchange-traded funds that invest in water stocks or stocks of companies involved in the water industry. This includes companies that perform water purification processes, bottle the purified water, and other related products. Water ETFs provide investors the opportunity to gain exposure to almost all water industry stocks by investing in the water ETFs.
Water, like food, is one of the most essential commodities across the world. Therefore, water ETFs are excellent additions to the investment portfolios of investors. They are relatively low-risk due to never-ending demand; however, because water ETFs are not studied and traded much, they may suffer from market risks related to lower volumes, high volatility, and obscurity.
Ticker | Company Name | Last Price | 1-Year Return |
|---|---|---|---|
| PHO | Invesco Water Resources ETF | $64.68 | 0.64% |
| CGW | Invesco S&P Global Water Index ETF | $56.05 | 3.09% |
| FIW | First Trust ISE Water Index Fund | $101.02 | 2.44% |
| PIO | Invesco Global Water ETF | $40.51 | -2.69% |
Factors to Consider Before Investing in Water ETFs
As is the case with all the ETFs, investors must consider the expense ratios and performance record of water ETFs before investing in them. A low expense ratio is highly correlated with better performance and higher returns.
In addition to the basic parameters, investors should also take the low volumes and high volatility of water ETFs into account before investing in them. Water ETFs often invest in stocks of regulated water companies and are, therefore, impacted by government regulations and laws. New rules and laws around the water sector should be considered before investing in water ETFs.
Which Water ETFs Should I Buy?
Not many water ETFs trade on the US stock exchanges. We have presented the best water ETFs for your reference to make the selection easier for investors. Investors should aim to buy water ETFs with low expense ratios and a good three-year performance record to generate stable long-term returns.
Investors must select water ETFs based on their investment goals, including time horizon, risk tolerance, geographical and sector exposure, and expected rates of return. Water ETFs are more suitable for long-term investors looking at high capital gains over a long period of time.
