How to Invest in the World's Most Precious Commodity: Water

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When asked what the world's most precious commodity is, most people would rattle off guesses from a list of the usual suspects -- things like gold, platinum, oil or diamonds. However, there is a commodity more precious than any of those, one that has the potential to rise in value dramatically over the next decade, and one that you can easily invest in.

If you want to know what it is, just watch any episode of a survival reality show. Whether it's "Man vs. Wild," "Survivorman" or even "Naked and Afraid," the first thing the TV survivalists do after assessing their situation is to look for this precious commodity -- clean, drinkable water.

We need water to live. The average person can last up to six weeks without food, but according to Dr. Claude Piantadosi, a professor of medicine and pathology at Duke University, the longest you could expect to survive without water is about 100 hours. And of course, water also is needed to grow the produce and raise the livestock we eat. It cools our cars and industrial machines. It keeps us clean and is essential for processing our waste. Essentially, without enough water, society as we know it ceases to exist.

Though almost 71 percent of the Earth is covered with water, 97.5 percent of it is salt water, and two-thirds of the fresh water is locked up in polar ice, leaving less than 1 percent of all the water in the world useful for society's needs. Fundamentally, that limited supply is the reason water prices could float much higher in the future.

Californians have seen the cost of their water go up dramatically due to increased demand and a long drought. The state's Department of Food and Agriculture estimates that if the current shortage isn't addressed, it will cost California as much as $2.2 billion in lost crop and livestock revenue in 2014 alone, as well as 17,000 seasonal and part-time jobs.

Investing Down Under or Via ETFs

The idea of water as a speculative investment recently got a boost from the launch of Waterfind, an Australian futures exchange for trading in water. Since the exchange went live in late March, more than 16.5 billion liters of water have changed hands through its online marketplace. Though that's a drop in the bucket in terms of global water reserves, it is still an important symbolic step in the commoditization of water as an investment vehicle.

But you don't have to live in Australia or learn about futures to add water investments to your portfolio. Some American exchange-traded funds offer exposure to companies and entities whose success rises and falls with the price of water.
  • PowerShares Water Resources Portfolio (PHO) is the biggest and most popular of these ETFs. Consisting of mostly small and mid-cap companies that produce products to conserve and purify water for business and industry, it includes well-known names such as American Water Works (AWK), Flowserve (FLS) and Toro (TTC).
  • PowerShares Global Water Resources Portfolio (PIO) is similar to PHO except that, per its name, it has a more global focus. Though American companies make up the largest allocation, the United Kingdom, France, Brazil and Japan are also well-represented.
  • S&P Global Water Index ETF (CGW) includes domestic and international companies and is half water utilities and half water equipment and materials companies.
  • First Trust ISE Water Index Fund (FIW) holds a global portfolio of companies that earn their revenue from the potable and wastewater industry, 90 percent based in the U.S.
Brian Lund's blog offers more on personal finance, the stock market, investing and the secret to eternal life.


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alfredschrader

You can distill sea water with heat by turning it into steam, but then you have to cool it so the steam can condense back into fresh water. This "cooling" requires you to continually add heat so the process is expensive and ineffecient. I invented a way to recover this heat and re-use it over and over in a process called fractionation. When solar power is used as the heat source, you get free fresh water.

July 17 2014 at 6:45 PM Report abuse -2 rate up rate down Reply
1 reply to alfredschrader's comment
Valerie

@ Alfred --- Did you invent the internet, too??? Oh, wait --- that was Al Gore. LOL

July 17 2014 at 8:44 PM Report abuse -1 rate up rate down Reply
1 reply to Valerie's comment
ted_wilson7

alfred invented bullshyte.

July 17 2014 at 10:55 PM Report abuse rate up rate down
weilunion

Yes, water too is commodified and as to investing in it, I would simply say you will be lucky to get any of it out of your tape with privatization and global warming.

Another stupid, callous article that is an ad for Wall St. and the damage they have and are causing to the world

July 17 2014 at 1:46 PM Report abuse +1 rate up rate down Reply
darbrow717

This is just great, is this what we have to look forward to?
Our water bills will fluctuate with the market just like oil?
I can hear the excuses already, Joe Schmo had a big dump and had to flush 10 times to get it down, raise the prices for the whole block.

July 17 2014 at 10:15 AM Report abuse +1 rate up rate down Reply
kblondie91

rich people will all end up in hell. u use poor people for selfish gain

July 17 2014 at 8:31 AM Report abuse -2 rate up rate down Reply
1 reply to kblondie91's comment
weilunion

Yes, the point. People cannot afford to eat or pay their water bills here in the US and this article pushes water and an investment. so sad

July 17 2014 at 1:47 PM Report abuse -1 rate up rate down Reply
1 reply to weilunion's comment
ted_wilson7

The U.S. has lived in the " land of plenty". They're spoiled and wasteful. this process will be that first of cutting waste in all it's pernicious forms. With 7 billion people on the planet growing at a compounded rate of about 1%/yr. There eventually won't be enough of any commodity to go around. The most perverted thing about the U.S. society is its sense of ENTITLEMENT, rendering it possibly the least sustainable country.

July 17 2014 at 11:00 PM Report abuse -2 rate up rate down