NEW YORK (
) -- You may not realize it, but freshwater is becoming a scarce commodity.
This is a result of a growing global population, advancements in medical technology that prolong life and the increasing wealth of developing economies.
Water is a commodity that is absolutely essential to life. At current rates, it is expected that demand for potable water will grow 6% annually. This, in conjunction with natural disasters and the water shortage already seen in many parts of the world, make the commodity extremely attractive.
The demand for water is well known, but what is expected to truly support price movements in the commodity is supply. Granted, the globe is comprised mainly of water, but of this water, a mere 1% can be used for by populations for agricultural production, industrial uses and human consumption.
According to recent government data and reports, water infrastructure all over the world, including the United States, is crumbling and will soon need a major overhaul. To make it even worse, investment in the sector is virtually nonexistent and almost every nation is well behind in water system upgrades.
Additionally, global warming and Mother Nature are taking their toll. Biologists have reported that soil moisture levels on earth are declining and will likely lead to a depletion of fresh water tables around the world.
With all things in mind, there will come a point where water shortages will force an influx of investment into the sector on both the domestic and international stage, enabling companies who specialize in extraction, treatment and water conveyance to reap the benefits.
Some ETFs to consider are:
PowerShares Water Resources
, which closed at $17.28 on Friday.
Claymore S&P Global Water
, which closed at $18.76 on Friday.
PowerShares Global Water
, which closed at $18.70 on Friday.
Although both macroeconomic and microeconomic factors suggest that an investment in the global water sector is inevitable, it is important to keep in mind the inherent risks involved when investing in equities. A good to way to protect against these risks is through the use and implementation of price points that represent abnormal price weaknesses and indicate that further price weaknesses are likely to follow.
According to the latest data at
, the price points for the aforementioned ETFs are: PHO at $16.87; CGW at $18.30; and PIO at $18.17. These price points fluctuate on a daily basis and reflect changes in market conditions. Updated data can be found at www.SmartStops.net.
-- Written by Kevin Grewal in Laguna Niguel, Calif.
At the time of publication, Grewal had no positions in equities mentioned.
Kevin Grewal serves as the editorial director and research analyst at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Additionally, he serves as the editorial director at SmartStops.net where he focuses on mitigating risks and implementing exit strategies to preserve equity. Prior to this, Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.