Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the water industry to thrive as demand grows for the limited resource for consumption, industry, agriculture, and sanitation, the PowerShares Global Water ETF
The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The water ETF's expense ratio -- its annual fee -- is a not-astronomical 0.75%, although it's fairly high for an ETF.
This ETF doesn't have the most impressive track record, but it's also very young, with just three full years on the books. It underperformed the S&P 500 in 2008 and 2010, but beat it substantially in 2009. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
With a low turnover rate of 27%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Several of this ETF's components made strong contributions to its performance over the past year. Aqua America
Other companies didn't add as much to the ETF's returns last year, but could have an effect in the years to come. Veolia
The big picture
Interest in water companies has been growing, given that only 2.5% of the world's water supply is fresh water, and less than 1% of that is available for human use. A well-chosen ETF can grant you instant diversification across the industry -- and make investing in and profiting from the sector that much easier.