Regardless of the fact that water is essential for life, it is often taken for granted.
Too many people believe world’s fresh water capacity will never end.
However, fresh water, which is suitable for drinking, is only 2,5% from all volume of “blue gold” on our planet.
Most of it is gathered in ground water, icebergs and earth.
On the surface there is only 1% from the total volume and it is under great threat.
That’s why financial crisis seems not as terrible as lack of water.
However, it’s the water crisis, which will threaten many developing and developed countries.
Usually, the market has ready-made instruments, like exchange-traded funds, which allow investing in the enterprises’ shares, which are connected to the following natural resource.
So, let’s talk on how to invest in water.
The topicality of investing in water
Drinking water is called “blue gold”, and just like any gold you can buy it, sell it and, accordingly, quote it.
Here we speak on how to get profit from the enterprises’ shares, which take part in manufacturing the product in question.
Consequently, you have an opportunity to invest in “blue gold”.
This product will always be a profitable asset and you can be sure in the stable growth of investments in it for the next 10 years.
Arguments for investing in this resource:
Till 2025 the population of the Earth will increase to 9 billion people.
However, 25 years after it, it will increase 30% more.
All of it will lead to the increase in need of fresh water three times for the forty years.
- Every year the need of such resource increases on 2,5 – 3% and with the population growth it will become even in higher demand.
Nowadays, more than 40% of the world’s population has no access to clean fresh water.
In addition, the developed countries use 2,5 times more than the rest of the world (in equivalent of per caput).
Climate conditions perform not the last role in defining the volumes of water consumption.
Only China within the next 10 years needs to increase the resources of aqua application in almost 5-10 times.
The World Health Organization claims 80% of all illnesses come from insanitary conditions and drinking polluted water.
Every year in average 5 million people (including children) die because of diseases, which were triggered by polluted water.
- Some data shows the world’s demand in water is already exceeding the world’s supply on 20%. Till 2020, fresh water will be needed 25% more than there is now at our disposal.
- The results of the research, which was help by the Water Resources Group, show that till 2030 the world’s demand will increase more than on 50%.
All the facts above prove the price on “blue gold” will definitely grow in the future.
Moreover, unlike the gas, people will buy it even for high prices, because it’s essential to survive.
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The tense situation with the supplies of such resource causes creation of the explosive trend on the market of the most valuable resources for human as well as on the share market of those companies, which are this or that way connected to the its production and supplies.
Reasons why the water assets grow in price
However, it’s not enough to say that in the future we’ll need more assets.
It’s important to understand that it’s not that simple.
So, the main reasons of the water assets’ growth are:
The volume of fresh water on the Earth is very limited and it is equal to 2,5 – 3% from the total volume.
The availability of drinking water is still smaller – in average 0,3%.
Moreover, this available asset is actively decreasing.
In order to save and transport “blue gold” one has to secure special conditions, which turn it into the market product.
Moreover, the cost of the ready-made product is always increasing because the environment is getting more and more polluted and one needs more money to study how to produce clean product.
In more than 80 countries the level of water-supply is critically low, and the population is very short of it.
So, UNO counted that till 2030, the half of the world’s population will live in the regions, which lack “blue gold”.
Even now the demand is higher than the market of natural water resources can offer.
- It was also counted that in 2020 we’ll need 25% more water, and till 2030 – 40% more than we use now.
You can easily understand that under the following circumstances to learn how to invest in water is the best option.
Actually, just like any in other business, there were established some companies, which provide us with their options on how to solve the problem of water deficiency.
How to invest in water?
So that it was convenient to invest in “blue gold”, there have been established many investment projects on the basis of ETF (Exchange Traded Fund), Exchange investment fund – index fund, shares of which are rotated at the exchange, mutual funds and the shares of separate companies.
By investing in the lack of water one implies, first of all, buying manufacturing enterprise, which preserve, clean and process it, and companies, which develop equipment and technologies for the aqua-sector.
This strategy has already recommended itself very well.
Investing in suchlike companies by buying their shares is able to show the investors how to make significant income.
Nowadays, the market’s volume in the industry of production and transportation of water is estimated in 500 billion dollars per year.
How can a person possibly find a more capacious sector to invest in?
Many investors are extremely interested in investments in the shares of the companies that develop the drinking water industry.
The huge difference between the yearly increase in population on 1,5 – 2% and consumption of water in 2,5-3% proves the prices on it will gradually increase in the future.
In its turn, it is reflected on the cost of shares of those companies, which maintain the sector in question.
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Funds, which offer to invest in the discussed natural resource:
- PowerShares Water Resources Portfolio (PHO),
- First Trust ISE Water Index Fund (FIW),
- Guggenheim S&P Global Water ETF (CGW).
These funds possess enough security papers of the manufacturing hydro-enterprises and partially the community facilities sector.
Annual fee is 0,6%.
Now, let’s discuss every one of them in particular:
A leader in this sphere is PHO, which assets are estimated in $980 million.
It consists of the shares from American companies, which manufacture the products, which are designed to save and clear water in private houses, business centers or in the manufacturing objects.
66% of all PHO belongings are the shares of industrial enterprises, 17% – community facilities, and the rest –the healthcare sphere and Research and Advanced Development.
From all security papers in the ETF’s portfolio the highest market capitalization have the shares from Roper Industries Inc., Water Corp and Flowserve Corp.
FIW operates the shares in 36 biggest industrial water companies in the USA, having the security papers on $200 million and getting annual fees of 0,61%.
CGW, unlike his rivals, is the global player, whose portfolio has 40% of community facilities’ shares – that’s the biggest number among the “aqua” ETF.
55% of its properties are gathered in the Western Europe, 30% – in the North America, 12% – in Asia, and their total value is $367 millions.
Among the mutual funds in this sector the biggest is considered to be Calvert Global Water Fund (CFWAX), which is estimated in $604 millions.
The content of its portfolio differs a little from the “aqua” ETF, and this fund demands much higher fee: CFWAX receives the annual fee rating 1,85%.
4 sectors, which are very topical for investment in water
The global water industry has four sectors:
- resources management and their distribution,
- high technologies in the sphere of water resources economy (including clearing and reusing),
- effective consuming,
- interrelation with the agricultural sector.
Resources management and their distribution include the whole infrastructure.
The economies of some developing countries do not have enough developed water infrastructure, and many developed countries require modernization of its distribution.
The advanced technologies in the sphere of resources’ economy, cleaning and reusing are also important (if not even more important), just like the world’s drinking water reserve.
The specialists counted that every year more than 1500 cubic kilometers of waste water appear, but people can clean and reuse all of it.
On the one hand, the technologies of how to clean the waste water become more effective.
Actually, there is huge potential here, because the cleared water may be used in agriculture (for irrigation) or energy sector (to produce electricity).
The following sector has the separate segment, which deals with cleaning sea water from salt.
It’s a very promising project, if you think how to make long-term investments.
The stock of fresh water is gradually running short, and because of it desalting sea water is a very good solution to the problem.
The effective use of water supplies is the third segment of this industry.
Specialists in this area learn how to develop the easiest solutions in the sphere of rational management and distribution of the remained “blue gold”.
Finally, people need much water to grow plenteous harvest.
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How to invest in the bottled water?
If you wonder how to invest in water, you have probably thought a lot about starting your own business in this sphere.
The market niche to invest in sales of fresh water exists even for the beginners.
Receiving an offer to invest in the following kind of business, one must estimate the number of nuances:
the cycle of sales: full, from getting out of hole to the delivery to the final customer or to the delivery of the ready-made product from the supplier.
The full cycle implies rather serious investments than the second option;
to research the water’s source.
It may be a hole, a lake, a river, a city water-line.
Drilling requires special researches of the local areas, permissions, and accordingly, additional expenses.
If a hole has water, one must learn how to provide special equipment and make the tubing.
Then, a person must research on how much it is suitable for drinking.
The equipment, which you’ll need to invest in water:
- a well,
- a pump,
- utility lines and the assembly room,
- filter system, some other equipment to clear the water,
- storage containers,
- washings for bottles with disinfecting blocks.
The industry of the bottled water, in theory, might not even exist.
However, due to marketing, bottles’ design, impressive and often made up technologies the manufacturers manage to sell water with fantastic mark-ups.
That’s why investment in this field is considered to be very profitable and promising.
The researchers from the Michigan University counted how much the USA citizens overpay for water in plastic bottles, comparing to the tap-water.
A three litre bottle in average costs $1,22.
Consuming it from half-litre bottles (the least beneficial option), a customer pays in average 2000 times more.
The question of how to invest in water is directly connected firstly to the degradation of the situation, which concerns the future lack of this precious resource.
That’s why more and more money will be spent on the research in this sphere and solution of this problem, which is connected to receiving clear fresh water.
That’s why investors should remember that development of this global industry is stimulated by three main trends: rapid growth of the world’s population, the necessity to renew the infrastructure in the developed countries and the necessity to improve the quality of drinking water.