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Water: Your Next Investment Opportunity

By: Divya Mahajan | Date: 1st December 2020

Have you ever heard of the Diamond- Water Paradox? Let me put it in simple words for you. We know that price of Diamond in today’s world is much higher than that of water, and why wouldn’t it be? Water is so freely available; it falls from the sky and runs through the land and is free! Whereas a diamond is sparse to find and costs a great deal to look the way it does.

But what we do not realise is that water is our necessity, a need on which every small to large species survive, so what should be of more value? Think.

But here’s a fact; We know that our earth is 70% water and out of this, 97% of the water is saltwater, meaning it cannot be used for serving most of human purposes.

Now what is shocking is that out of the 3% of freshwater on this earth, only 1% is available freely for human use. And yet, we find people keeping the water taps running in so many public places!

If we look at the current scenario of water, it can be compared to a situation where 4 people are drinking out of one glass of milkshake, which means the milkshake is being sucked from 4 different directions, and is going to finish 4 times sooner than it should have! Similar is the case with water; Water is needed for so many purposes; agriculture, industries, supply to common people.

And with the increased agriculture, rapid industrialization and increasing population; water on this planet is getting scarce day by day. Another major problem that people are facing is the problem of fresh water pollution, which will also lead to the scarcity of this resource.

And this scarcity of water is going to open investment opportunities for many investors. Just like any other commodity, which water is soon to become, the less supply we will have of fresh water, the more valuable it is going to get.

The CME (Chicago Mercantile Exchange) has reported that around 2/3rd of world’s population will face the problem of scarcity of water till 2025. And around $200 billion are required to keep these spigots running, has been reported by the UN in 2016.

I know what you are thinking now, how did we let the situation get so much out of hand? We need to use water so cautiously! While this is true, what you can also do in order to secure water for your future is to invest in it!

There are small cap to big blue chip companies who are in water-related businesses like beverage providers, utilities, water treatment/purification firms and equipment makers who invest in water on a large scale like the American Water Works Co. and Aqua Water. And by investing in their stocks, you can invest in water too!

There are other options of investment that may interest a layman like; Investment in low-cost ETF’s (exchange traded funds) of water-related stocks, such as Invesco water resources ETF or First Trust water ETF.

Another option is to invest in water rights; which gives investors the access to clean water from lakes and groundwater or rivers, and the investors can charge the companies or government to access the water that is covered under their contract.

The recent years have been seeing a sudden increase in the demands for investing in clean water, and if this trend continues; Investors will expect to see new investment opportunities in this sector, which will provide exposure to this new but precious commodity.

The bottom line being that these opportunities to invest in this scarce resource are flowing freely in today’s time, so dive in!