Both are fine. Fermenting is a biological process and as such isn't so sensitive to exact measurements like chemistry.
Adding water will reduce gravity (lower alcohol at the end). Adding sugar will increase gravity (higher alcohol at the end).
This adding sugar business is actually common practice for higher alcohol stuff because some yeasts essentially have a hard time starting off in super sweet must.
If you're familiar with aquarium life, yeasts are like fish. Sudden environmental changes are bad, but slow changes are okay.