What it is:
A water ETF is an exchange-traded fund that invests in water-related companies.
How it works (Example):
An exchange-traded fund (ETF) allow investors to purchase a basket of securities in a single transaction.
For example, the PowerShares Water Resources Portfolio ETF (NYSE: PHO) invests only in American water companies. The PowerShares Global Water Portfolio ETF (NYSE: PIO) invests more globally, as does the Guggenheim S&P Global Water Index (NYSE: CGW). The First Trust ISE Water Index ETF (NYSE: FIW) focuses on waste water and potable water.
Why it Matters:
All humans need water to survive, which makes water a valuable investment opportunity, especially considering that the earth's population is growing, as is its demand for water. Water ETFs tend to be the simplest way for investors to make water-related investments, which can include treatment facilities, water-equipment manufacturers, water distributors, water retailers and companies that operate water sources.