Invest in Water: Can You Gain Profit from What You Drink?

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Water and clean water technologies sit at the convergence of ecology, demography, and capitalism. The fact is that by 2025 the UN estimates that nearly 1/3 of the world’s population will be living in absolute water scarcity. Increased desertification of once arable, fertile land will help to press nearly two-thirds of the world’s population under water stress and food scarcity.

China is a great example of the future we are all facing. Eighty percent of China’s lakes and rivers are unsuitable for even fish to live in, much less human consumption. As a result, China has had to pump money into water treatment, waste treatment, anti-pollution and restoration initiatives in recent years. Even with this level of investment, China still finds itself on a collision course with an irascible truth. There is not enough. This is a time to wonder whether it is or not a wise option to invest in water, and what can it really do for the planet.

The Future of Water

Add to this the need for industrializes nations to improve old and inefficient water and sewer system. The lead poisoning of Flint, Michigan’s water is in no way unique or isolated. The states of California, Texas, and Louisiana have all wrestled with compromised water systems in recent year. They have done this with everything from algae blooms to broken levees causing massive localized emergencies and costing tax payers millions.

While over 70% of the earth’s surface may be covered in water, only 1% of that is fresh and safe enough to sustain life. With the increased degradation of our oceanic eco-systems, industrialization, urbanization, and the increasing standard of living for larger and larger swathes of the human population, the demand for water is quickly outstripping the supply. This makes water, arguably, the most valuable commodity on earth. And while nations may be willing to war over oil right now, in the not too distant future that may change drastically. For the savvy investor, adding water to the list of commodities in your holding only makes sense.

Since water is essential for life, companies that address how to expand the water supply, increase efficiency and revolutionize water treatment can expect massive growth. This is since worldwide, catastrophic water scarcity won’t happen overnight. If you’re going to invest in water, it is best to look at water technologies as a safe, long term investment for your diversified portfolio.

5 Areas to Invest in Water and Make It Wise

1. Utilities

One way that investors can make money with water is by investing in water utilities. The US water system is highly fragmented, with many small systems servicing small or isolated populations. In recent years, concerns about the quality of water coming out of the tap have sky rocketed. Therefore, consumers have also questioned the smaller utility’s ability to deliver safe drinking water right from the tap.

This has lead to an increasing consolidation of water utilities. Savvy investors have already began to invest in water utilities, while the iron is still hot.

2. EFTs

If that proves too rich or too time-consuming for you, you can invest in water exchange-traded funds or ETFs. This class of water related ETFs is proving to be increasingly popular, with investment apps like Stash having a whole category dedicated to clean water technologies. ETFs mimic index funds with the exception that trading is commission free.

Like index funds, their goal is to provide their investors with a standard return with minimal investment. Chances are you probably have bought quite a few already and don’t know it.

3. Eco-Friendly Start-Ups & Research

Another smart way to invest in water is to focus on companies that are pioneering new technologies. It’s not just about eco-friendly start-ups that take interest in cashing in on the looming water crisis. A number of heavy hitters in every industry from chemical engineering to manufacturing are pouring more and more money into research and development for clean water solutions.

Water-related data companies are an up and coming segment of this market. We may rethink our water treatment and distribution methods. In the meantime, these companies are hard at work gathering the data necessary to get the job done.

invest in water

4. Water Rights

Lastly, investing in water rich farmland and purchasing water rights is another, slightly more predatory way to use water to your advantage. Rather than investing in the water problem, you would have to invest in water itself. Buying water rights allows you to charge for the use of the water source.

How valuable such an investment would be to you depends directly on the scarcity of water in your area and the needs of the community. It is not a long term investment but it can be a lucrative one. It is, however, subject to the greater fool theory. This means that you will have to find somebody willing to pay you enough to make the investment worthwhile.

5. Farmland

In the case of water-rich farmland, we have to revisit the idea of desertification. This is when, through a series of natural and man made circumstances, arable farmland dries up. It is the creation and expansion of desserts. The famines and drought in Eastern and Northern Africa are prime examples of this. Simply put, water rich farmland is becoming more and more valuable.

Owning land that is near a reliable water source and can produce agricultural products doesn’t seem like an investment in water on its surface. Yet, it is. Land capable of producing water intensive crops will become increasingly valuable. This happens as the world’s usable surface water begins to dwindle. So, in many ways, you are selling water, much like a utility, except your crops are now your pipeline.

The Big Picture

Those who want to invest in water may find that the barriers to entry can be high. However, for smaller investors, ETFs and individual start-ups may be the better option.

However, there is no doubt among investment professionals that water is a safe and worthwhile investment. The real question is whether or not you can afford not to invest in water.

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