Invest in water. A long-term strategy!

Do you know what it is and how? invest in water? In the following article we will tell you everything you need to know to do it correctly and its benefits.

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invest in water

Every day, the stock market moves constantly, thousands of people buy and sell products every day constantly earning and losing money. In the stock market you can buy and sell a large number of things, from shares of recognized companies such as Netflix, to investment funds of large groups of companies, however, one of the most important products that move in the stock market are commodities. .

Commodities are all those goods intended for commercial use, they are basic and other market products are made from them, that is, they are raw materials. In addition, these basic goods have the special characteristic of not having any added value, they are generally unprocessed and have the same quality.

There are different types of commodities, among them are those of an energy nature, industrial metals, agricultural and energy. Within these classifications, some of the most popular commodities are wheat, corn, oil or gas, however, there is a resource, which is also a basic good, present in the manufacture of almost any other product on the market, Water.

Water, the liquid treasure

Water is, along with oxygen, one of the most vital resources not only in our lives but in the survival of the whole world. Water is necessary for human life, an average person drinks about 3.8 cubic meters of water per month and uses about 2500 to 5000 liters per year.

Water is equally necessary for the survival of all kinds of animal species on earth. All plants require water to live, some more than others, but they all need water. In essence, water is one of the most useful and influential resources for life on earth.

The water, therefore, is used in the production of almost any product on the market. From an apple on a tree to the production of a steak, water is everywhere; An example of this is observable when analyzing that to produce an orange 50 liters of water are needed, 650 liters of water for 500 grams of bread, 2500 liters for 500 grams of cheese and 4500 liters for 300 grams of beef fillet.

Therefore, investing in water is investing in one of the most used products in the entire market. Water is a very viable long-term investment option with good returns for people, however, many people do not know that this is possible.

The water problem in the world

The earth is only 75% covered in water, which could leave us with the idea that in reality the water may not have value for its vast amount. However, by placing the magnifying glass on these values ​​we can realize that, of this amount of water in the world, 97.5% is salty and only 2.5% is fresh water, suitable for human consumption.

When we look even more deeply at this figure we realize that the number is reduced even more. Within this 2.5% of fresh water, 70% comes from ice at the poles and 29% is in the form of groundwater; only 1% of this fresh water is found on the surface and manifests itself through lakes or rivers.

Taking this 1% of fresh water found on the surface as a total, 70% of this is used for irrigation of agricultural fields and 20% of this water is used industrially in the production of products on the market. . Finally, the remaining 10% is found in our homes as it is for domestic use.

Due to the aforementioned, it is possible to observe that in itself the water for human consumption is extremely reduced if we compare it with the water not suitable for consumption. In addition to this, the drinking water used in the production of products is also very scarce, which makes it one of the most important goods in the stock market.

The International Food Policy Research Institute alarmingly indicated that in the next 15 years the worldwide gap between the supply and demand of drinking water will increase to a total of 40%. Similarly, Bank of America reported that global water infrastructure services will increase between 5% and a total of 8% per year.

Consider investing in Water

Looking at the world's current problem with water, we realize very quickly that in the future the demand for water will rise and the supply will be reduced. It is not surprising that with the problem of global warming and due to certain works of the human being, there is less and less water suitable for human consumption, therefore, investing in water implies investing in something that will have more value every day.

A person cannot invest in water itself, such is the case with goods such as cotton, gold or oil. Investing in water does not necessarily mean buying the rights to a lake or river since, as is the case in several countries such as China and all those that make up Latin America, water is owned by the State.

Similarly, although it is unusual, people in certain places buy river funds that rent the use of water to companies. However, this is not very profitable because prices tend to vary excessively depending on the dry or rainy season; investing in water really means investing in one or several companies that work and manage this valuable resource.

In the industrial world there are companies that work with the supply, treatment or purification of water, by investing in water you are actually investing in these companies. When the value of water increases, these companies will also increase in value and your investments in them will also increase, this means that investing in water is a forward-looking move, something that could reward your portfolio in a few years.

Investing in Water implies passive earnings

Water, despite being one of the most outstanding commodities, is a basic resource that is very different from others. While commodities like corn or grains are repeatedly bought and sold on the stock exchange, water behaves very differently on the stock exchange.

The process of buying and selling on a recurring basis is called speculation and is done for the purpose of generating short-term profit from the difference in sales. The person who does this does not care about keeping the value, but about selling it and making a profit on the sale. In the commodity market, speculators buy and sell in these basic goods or raw materials.

In the case of water, it is not possible to speculate with it because there is no product directly derived from it, therefore, you cannot invest in water per se. However, it is possible to make a profit, not through speculation but through investment.

Investors, in contrast to speculators, seek to buy securities or shares and hold them over time. These people generally see their earnings over time through the appreciation of their shares and the payment of their dividends, therefore the income that is generated is passive earnings.

If you want to have more knowledge about what passive income is, we invite you to visit the following article for more information: Passive Income The best ways to generate it!.

How to invest in water?

It is possible to invest in the water niche by keeping an eye on the future and preventing the revaluation of this precious and useful resource. There are three main ways in which we can invest in the market for this basic good and in this article we are going to explain them to you.

These ways of investing in water are investing through ETFs, investing in shares of companies that work directly with water, and investing in crowdfunding projects. Each of these investments has its own characteristics along with its advantages and disadvantages.

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Investment in Companies through Shares

Investing in stocks means buying a small part of a company, although it is less diverse than a basket of stocks, it is the most direct and practical way to invest. The investment by buying company shares is usually risky because we only buy a part of a single company, so the value of the investment depends on its development or decline.

In the water sector there are hundreds of companies that are responsible for the treatment, quality, generation of infrastructure, supply and purification of water. These companies work throughout different countries offering these services managing the valuable resource.

To know how to invest in one of the many water companies that exist in the world, it is necessary to recognize the demographic characteristics of the country and the possibilities of growth of the companies in the country. It is necessary to take into account those countries where there is the necessary budget to carry out work to create the necessary infrastructures or, in the same way, it will be necessary to evaluate those countries in which it is anticipated that they will have water problems in the future.

Investing in water companies is investing in the future

It is true that the profits that we can receive from the shares or investments that we have in the companies or funds that work with water are great, but they are not everything. When we talk about investing in water we talk about investing in something even more important, that is investing in the future of water.

Many companies work in favor of generating water decontamination projects or in projects to bring water to areas where adequate infrastructure does not yet exist. Likewise, population growth increases in these areas, water decreases, and the need for water becomes greater.

In countries where water pollution is increasing, as is the case in India or Australia and various countries on the African continent, companies carry out extensive sanitation and purification work on the valuable water resource. Through the purchase of shares you are also taking part in these projects.

Investment through ETFs

As we mentioned, unlike many goods and products that are bought and sold on the stock market, you cannot speculate on water. One of the ways to invest in water is through certain financial products called ETFs, which are exchange-traded funds where more than one company participates, therefore, when investing in an EFT you are investing in a basket or group of listed securities as opposed to shares.

ETFs are perfect to start investing in water as a person with little capital, but a great vision. The exchange-traded funds do not have a minimum entry, therefore, anyone can start participating in them from small amounts.

In addition to this, since you are investing in a basket of securities, the risk is much lower than if you were investing in shares of a single company. Investment risk control, combined with investment in one of the most valuable resources on earth, generates more confidence when investing in water.

ETFs are managed through indices. The indices symbolize the behavior of the market, if the companies have positive results, the indices rise as a consequence, however, if the results are not favorable, the indices fall; As we are talking about a group of companies, it is difficult to carry out an analysis of each one, therefore, the index has the function of representing the entire market, in the water market there are two indices that stand out as the most important:

World Water Index

The World Water Index is made up of the 20 main companies that work with water. Its main functions in the market and, therefore, its income, correspond to the creation of infrastructures, the supply, purification or treatment of water.

S&P Global Water Index

The S&P Water Index exchange-traded fund is made up of the main companies that work and manage water in the world. Forming a total of 50 united companies, these companies work with water treatment and the necessary infrastructure.

The ETF problem

While investing in ETFs is a great option for people with small capital, some of the fund companies don't work entirely on water. In some cases, the operations that these companies carry out with water are usually only a small portion of what they actually do.

The problem with this is that the correlation that exists with the market can become a bit high, which could imply changes in our investments. Even if a crisis were to exist in a sector other than water, it would still end up negatively affecting the value of our investments.

However, it is a risk that should not be so worrying since our investments are made with a long-term view. In addition to this, in the coming years it is very likely that the price of water will rise as well as the budgets when carrying out all the works that concern water (Supply, treatment, among others)

Invest in water through crowdfunding projects

The possibility of making a crowdfunding request has opened the doors to the most original ideas and projects so far. Many people are concerned about the current state of water, therefore, this creativity in projects and innovative ideas from committed people have also been seen on these platforms.

Through crowdfunding or collective financing it is possible to invest in companies from different sectors of society. Within collective financing platforms, many projects that have the purpose of managing water have seen the light.

However, the risk involved in investing in crowdfunding projects is higher because, although the ideas are original and innovative, it should not be forgotten that the success rate of a start-up is not very high. However, if it is successful, the profits that would be obtained due to the investment in the project can be very good; If you decide to invest in collective financing projects, you have to be very careful when choosing.

We hope you will enjoy this article and if you want more information on how to invest in water and its advantages, we invite you to watch the following video:


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