Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect water-related companies to thrive over time, because clean water is so essential to life, and water-related services are likely to always be in demand, the Guggenheim S&P Global Water Index ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The Guggenheim ETF's expense ratio -- its annual fee -- is 0.70%. That's higher than the typical ETF, but lower than the typical stock mutual fund. The fund is fairly small, too, so if you're thinking of buying, beware of occasionally large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF has performed reasonably well, outperforming the world market over the past three and five years. 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 8%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Several water-related companies had strong performances over the past year. Water utility Aqua America
California Water Service Group
Other companies didn't do as well last year, but could see their fortunes change in the coming years. France-based Veolia Environnement
The big picture
Demand for water isn't going away anytime soon -- or ever! A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
Water is a defensive business, and defensive stocks can help you sleep at night. So can the companies our analysts present in our special free report, "3 American Companies Set to Dominate the World."
Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Veolia, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of California Water Service Group. Motley Fool newsletter services have recommended buying shares of California Water Service Group, Veolia, and Aqua America. The Motley Fool has a disclosure policy.
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