Catch a New Wave in Water ETFs

The standard deviation of CGW's back test is lower than PHO's, which means the former is likely to be less volatile than the latter. For three years, it's 10.81% vs. 15.31%, and for five years it's 13.84% vs. 15.31%.

After my column on PHO, it enjoyed a very good run, rallying more than 20% in about six months. It then gave back all those gains in the following four months and now is up 25% since its low last July. While the modest outperformance has been nice, I believe the expectation for this theme to play out and add value to a portfolio should be in terms of years.

Water ties in with infrastructure, and while potable water is arguably the most important commodity on the planet, the decisions to spend on this sort of infrastructure may be slower in coming than investors would like.

That said, my initial reaction to CGW is positive -- so much so that I'm considering a switch from PHO. But I don't expect to buy CGW as quickly as I did PHO. The early PHO purchase worked out for me, but usually it makes sense to let new products season for a while -- say three to six months, to get a feel for how its volatility works out in the real market -- before hopping on board.

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