Are you a Canadian investor looking to diversify your portfolio with water-related investments? Water scarcity is becoming an increasingly pressing issue around the globe, making water ETFs an attractive option for socially responsible investing. But with so many options available, it can be difficult to know where to start.
This article will explore the top water ETFs available to Canadian investors, considering factors such as fees, holdings, and performance. Whether you’re a seasoned investor or starting, this guide will help you make informed decisions about your water-related ETF investments. So, let’s dive in!
What are the benefits of Water ETFs?
Water ETFs, or Exchange-Traded Funds, provide investors with an easy and cost-effective way to gain exposure to the water sector. Water ETFs offer a variety of benefits, including diversification, low costs, and access to an often overlooked sector.
First, water ETFs can help investors diversify their portfolios. For example, investing in a fund that focuses on the water sector can reduce portfolio risk by allocating a portion of the investments to an industry often underrepresented in traditional portfolios.
Second, water ETFs are typically inexpensive compared to other funds and offer access to a wide range of investments. ETFs usually have lower management fees than mutual funds and don’t require investors to pay hefty commissions when buying or selling shares.
Third, water ETFs give investors access to an often-overlooked sector. Water is becoming increasingly scarce, making investments in the industry a valuable way for investors to diversify their portfolios and benefit from the industry’s growth.
Water ETFs Available To Canadian Investors
Here are some Water ETFs Canadians can invest in easily on the TSX and Nasdaq.
iShares S&P Global Water ETF (TSX:CWW-T)
The iShares S&P Global Water ETF (TSX: CWWT) is an exchange-traded fund (ETF) designed to expose investors to the global water sector. The ETF tracks the performance of the S&P Global Water Index, which provides access to companies engaged in the provision of water-related products and services, such as those involved in the production, distribution, and treatment of water. The ETF currently offers a dividend yield of 2.43% and a total expense ratio of 0.25%.
The fund tracks the S&P Global Water Index, composed of 49 water stocks, most of which are utilities, industrial and information technology companies.
First Trust Water ETF (FIW)
The First Trust Water ETF (FIW) is an exchange-traded fund (ETF) launched and managed by First Trust Advisors L.P. that tracks the ISE Clean Edge Water Index. The index comprises companies involved in water utilities, services and products, such as infrastructure, filtration systems and conservation. FIW allows investors to gain exposure to the global water industry without buying individual stocks.
FIW offers diversification within the sector with a low management fee of 0.60%. In addition, the fund currently offers a dividend yield of 3.66%.
Global X Clean Water ETF (AQWA)
The Global X Clean Water ETF (AQWA) is an exchange-traded fund (ETF) that provides exposure to clean water infrastructure companies, primarily in developed markets. The fund seeks to track the performance of the Solactive Clean Water Index, which holds equities from across the globe involved in clean water projects and services.
The index includes companies from various sectors, such as engineering and construction, manufacturing, chemicals and utilities. AQWA has a management fee of 0.45% and currently offers a dividend yield of 1.78%.
Invesco Water Resources ETF (PHO)
The Invesco Water Resources ETF (PHO) provides investors with exposure to global water-related companies, such as those involved in water production, distribution and treatment. The fund tracks the Nasdaq OMX US Water Index, which is comprised of companies from both developed and emerging markets.
PHO has a low management fee of 0.55% and offers a dividend yield of 2.05%. The fund is designed to provide investors with diversification within the water sector and exposure to international markets.
In addition, the Water ETF represents the Nasdaq OMX US Water Index of 34 water stocks (most medium to large US stocks ). With assets under management of $981.5 million, PHO is the largest water ETF on the market.
Ecofin Global Water (EBLU)
Ecofin Global Water (EBLU) is an exchange-traded fund (ETF) that provides investors with exposure to the global water industry. The ETF tracks the Ecofin Global Water Index, which consists of companies engaged in providing water services, equipment and technologies worldwide. In addition, these companies are involved in water production, distribution, storage and treatment activities.
How to Invest in Water ETFs:
For Canadian investors, there are a variety of water ETFs available that can help diversify a portfolio or seek out potential growth opportunities.
Before investing in an ETF, it is vital to research the fund and its holdings to ensure that it aligns with your investment goals. You can buy water ETFs through a discount brokerage account or financial advisor.
Buying water ETFs with your online broker is relatively simple. The first step is to research available ETFs that focus on the water sector, such as those that invest in companies involved in water treatment, equipment and services or the conservation of water resources. Once you have identified a few potential options, it’s time to open a brokerage account.
Most major online brokers offer access to ETFs, and you can use the same account to make other investments. Then, you can enter a buy order with your broker. First, you’ll need to specify the name of the ETF you want to purchase and the number of shares or units. Once filled, you will own a piece of each company in the fund’s portfolio.
What Sectors Do Water Companies Operate In?
Water companies typically operate in two main sectors: the utility sector and the environmental services sector.
Water companies provide the utility sector’s drinking, waste disposal, and wastewater services. This includes building and maintaining water supply systems, managing water resources, treating drinking and wastewater to remove contaminants, and providing household water service.
Environmental services involve protecting natural resources by monitoring the quality of air, soil, and water. This includes recycling, restoring land, and conserving natural resources.
The diversity of the funds sometimes complicates the reasons for the strong performance of water ETFs. Water is not an asset class per se but has several asset classes, including staples, consumer goods, infrastructure, information technology, utilities, healthcare, and industry. For example, two companies involved in the five water ETFs traded in North America are Xylem Inc. and Danaher Corp.
Xylem is classified as an industrial stock because it makes water treatment plants.
The water sector provides Canadian investors an increasingly attractive option for socially responsible investing. With the emergence of various water-related ETFs, investors can access multiple companies involved in water production, distribution and treatment.
As with any investment, it is vital to research the fund and its holdings before investing. Water ETFs can effectively gain exposure to the global water industry without buying individual stocks.
Investing in water ETFs is an effective way to gain exposure to the global water industry without purchasing individual stocks. By investing in a water ETF, investors can achieve diversification within the sector and access to both developed and emerging markets. Investing in this type of fund also offers potential long-term growth and a steady income stream through dividends.