Want to learn how to trade water? This guide explores the reasons you may find water an appealing commodity to trade and what position it takes in the global market.
Then, we explain different ways and instruments you can use to trade water (like CFDs or options), and where you can find regulated brokers in .
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Reasons You Might Invest in Water
Companies that manufacture water equipment, dispose of water waste, and build water infrastructure are likely to benefit from the factors listed below.
In addition, should a global futures market begin to mature, these factors are also likely to lift physical water prices:
- Emerging Market Growth
- Climate Change
- Portfolio Diversification
Important: This is not investment advice. The arguments presented here for and against investing in this commodity are informational only. Always consult a professional advisor before making any investment decisions.
Emerging Water Market Growth
The growth of the global economy is a significant factor that could lift both the shares of water equipment manufacturers as well as physical water prices.
As emerging countries in Africa, the Middle East, and Asia modernize their economies, the need for clean, potable water for irrigation, drinking, electricity, and industry will grow.
Climate Change Impact On Water
Climate change has the potential to be the biggest catalyst for a rise in physical water prices.As global temperatures rise, glaciers could melt and rivers and streams could recede. These events have the potential to create major water shortfalls across the globe.
Water For Portfolio Diversification
Trading a vital natural resource can add diversification to a portfolio.
In many cases, factors that move water investments are different than the factors that affect stock and bond prices.
Where Can I Trade Water?
If you are looking to start trading water and other agricultural commodities, here’s a list of regulated brokers available in to consider.
| Broker | Details | Sign up |
|---|---|---|
 | User friendly platform and leading risk management tools. | Open Account Now Plus500 Review |
 | Social trading to copy leading traders. | Open Account Now eToro Review Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk. |
 | Multiple trading platforms and over 1,700 stocks. | Open Account Now XTB Review |
 | Reverse trades up to 1 hour with dealCancellation. | Open Account Now easyMarkets Review |
 | Established for 40+ years. | Open Account Now HYCM Review |
 | Up to 500:1 leverage for pro traders, share CFDs on stocks with no mark-up. | Open Account Now Pepperstone Review |
 | Proprietary technical analysis features. | Open Account Now Markets.com Review |
 | Up to 400:1 leverage available for professional traders. | Open Account Now AvaTrade Review |
Data last reviewed:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 50.00%-86.00% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
Ways To Trade Water
Investors have mostly indirect ways to gain exposure to water prices.The previously mentioned Waterfind Australia offers water forwards through which investors can purchase parcels of water in different irrigation regions across Australia.
However, geography and liquidity for the platform are limited.
What Are Water ETFs?
These financial instruments trade as shares on exchanges in the same way that stocks do. ETFs actually stands for exchange-traded funds, which are baskets of company stocks.
There are several ETFs that invest in companies involved in the water industry including the following:
| PowerShares Water Resources | Guggenheim S&P Global Water Index ETF | First Trust ISE Water Index Fund | PowerShares Global Water ETF |
|---|---|---|---|
Data last reviewed:
There are many publicly traded companies that have various levels of exposure to water.
While investing in companies can be a leveraged way to gain exposure to water prices, many of these companies can react to other factors such as regional demand for their products, competition, production costs, and interest rates.
In addition, factors such as company management and the overall stock market can also affect these investments:
| Company | Current Price | Overview | Listings |
|---|---|---|---|
SJW Group | The parent of various subsidiary companies that provide regional water service, develop new water projects and develop land. | New York Stock Exchange (NYSE) | |
Middlesex Water Co | Operates water and wastewater utility systems for cities and private organizations in the United States. | NASDAQ | |
Mueller Water Products | US-based water infrastructure firm that operates in the United States, Canada and overseas. | New York Stock Exchange (NYSE) | |
Calgon Carbon Co | US-based company that designs and sells equipment to purify air and water. | New York Stock Exchange (NYSE) | |
Zurn Elkay Water Co | US-based company that manufactures and sells water management systems. | New York Stock Exchange (NYSE) |
Data last reviewed:
How Do Water CFDs Work?
Another way to invest in shares of water companies is through the use of a contract-for-difference (CFD) derivative instrument.
CFDs allow investors to speculate on the price of companies involved in the water industry. Learn more about how CFDs work in this CFD Trading Guide.
The advantage of CFDs is that investors can have exposure to share prices without having to purchase shares, ETFs, futures, or options.
Some regulated brokers offer CFDs on shares of water companies. Customers deposit funds with the broker, which serve as margin. See this explanation of leverages and margins to learn more.
IMPORTANT: CFDs are not available in the USA.
Should I Invest In Water?
There are several ways to gain exposure to the water industry, and investors should consider the factors that move each of these investment vehicles.
Since most traders only have access to a handful of futures markets like CME’s Nasdaq Veles California Water Index Futures (NQH2O), the most practical way they can gain exposure is through shares or ETFs.
Waterworks utilities are one vehicle for investing in the sector.
However, while they pay hefty dividends and have low risk, they probably have less potential upside than investing in companies making equipment for water collection and treatment.
Why Might Water Equipment Companies Perform Well?
There are three reasons water equipment manufacturers’ shares could perform well in the years ahead:
- Energy demand in growing agricultural economies
- Potential water crisis due to climate change
- Infrastructure Demand
Energy Demand In Growing Agricultural Economies
China, India, Brazil, as well as countries in the Middle East and Africa are among the many fast-growing regions that will have enormous food and energy needs in the years ahead.
Demand for water should grow as these economies expand.
Potential Water Crisis Due To Climate Change
Global warming is a positive catalyst for water prices.
Higher temperatures will diminish the global supply of fresh water and could lead to a water crisis.
Water Infrastructure Demand
The United States has not invested in major infrastructure in decades. Pipes and equipment that carry water require upgrades in many developing Western economies.
Water equipment manufacturers should benefit from an infrastructure overhaul.
It is difficult to envision bearish scenarios for the water industry. However, an economic slowdown that affects emerging markets or a reversal of global warming could put pressure on water equipment manufacturers.
FAQs
What are water markets?
Water markets are monopolised systems through which institutional and retail traders can speculate on the prices of water. Such water markets are based on usable water with constant demand, since most of earth’s water needs to be processed and treated before it can be put to practical, profitable use.
Can water rights be sold?
Yes, water rights can be sold by companies and organizations who own rights to various water resources or systems. Retail traders may purchase water rights in the form of company shares, or water futures. One such water futures product is CME’s NSH2O. See the different ways to trade water to learn more.
Further Reading
- Want to learn more about water as a commodity, and how it’s purified? See this Water Commodity Guide.
- Our research team has also gathered the list of US states with the largest aquaculture economies.
- Find out about the Chicago Mercantile Exchange (CME), one of the only futures exchanges to offer a water futures contract for traders.
Update history
This page was revised 8 times between January 2021 and April 2022.
Restructured related resources section into a bulleted list format and added disclaimer tags.
Added two disclaimer notices and restructured Further Reading section into a bulleted list format while removing some related links.
Added information about US states with the largest aquaculture economies based on research team findings.
Added reference to US aquifer economy research in Further Reading section.
Replaced introductory call-to-action with quick-start broker recommendations for coal trading, removing the original water trading context question.
Added quick-start section with top brokers for immediate trading, replaced introductory call-to-action.
Added guide content including introduction, multiple trading method sections (ETFs, CFDs, shares), comparison table, and detailed analysis of water as investment commodity.
Added introduction, table of contents, and substantial new sections covering water ETFs, CFDs, water company shares, and investment considerations with detailed explanations of trading instruments and market factors.
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