Back in November, I had a post on why water could find a place in your portfolio.The main point of the article is as we face a global shortage ofdrinking water, investing in water makes a sound choice for long terminvestment. If you are also interested in investing in water, the mostconvenient choice so far is the Powershares Water Resources ETF (PHO), which tracks Palisades Water Index(ZWI), a “modified equal-dollar weighted index comprised of U.S.exchange-traded companies engaged in the global water industry.” Theindex includes companies that are in business of potable waterprovision, water treatment, and technologies and services that aredirectly related to water consumption. The five-year performance of the index as compared against S&P 500 index is shown in the following chart. The index itself has more than doubled after touching a low in early 2003.

ZWI has 40 components and its top 10 holdings are

• Calgon Carbon (CCC): filtration
• Synagro Tech (SYGR): water management
• Itron Inc (ITRI): water meter
• Layne Christensen Co. (LAYN): drilling
• Nalco Holding Co. (NLC): water treatment
• Pall Corp (PLL): filtration
• Millipore Corp (MIL): filtration
• ITT Industries (ITT): pumps
• Insituform Technol (INSU): pipeline installation and repair
• Franklin Electric (FELE): pumps and motors