Alternative Investments: Investing in Water Resource Stocks Through an ETF

June 22, 2020 | Alternative Investments, News

Water resource stocks are an excellent non-traditional investment to decrease risk.

The Invesco Water Resources ETF (NYSE: PHO) holds a number of water resource companies in its portfolio. Drinking water is a precious resource and a need that can never go out of fashion. Clean and safe drinking water will always enjoy consumer demand, as well as their dollars. This ETF could deliver excellent returns in the long-term according to MENAFN.

The sector has benefited from significant privatization of water utilities that were previously run by state or municipal authorities. For the aforesaid reason of water being an essential commodity, the companies will always possess pricing power.

More reasons for investing in this ETF

Water stocks represent a great avenue for diversification for the following reasons:

  • High earnings growth and regular dividends
  • Non-traditional investments that can diversify risk
  • Water utilities trade at a premium compared with other utilities such as electricity and natural gas
  • Water utilities are more recession-resistant than other utilities because more of their revenues originate from residential homes
  • Excellent ESG play because water companies are stewards of a natural resource.

Invesco Water Resources ETF (NYSE: PHO)

The ETF tracks the NASDAQ OMX US Water Index. It is the most popular water-themed ETF for U.S. listed companies that create products to conserve and purify water. It has assets under management of $1.08 billion.

Its expense ratio is 0.60%.

The ETF has delivered a return of 10.92% over three years.

In contrast, the NASDAQ OMX US Water Index and the S&P Global Water Index have delivered 11.63% and 6.83% respectively.

Related Story:    Now, An AI-Enabled ETF That Delivers Investors’ Five Favorite Things                                               

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