Foreign Direct Investment vs Portfolio Investment

Question 1

Foreign Direct Investment vs Portfolio Investment:

Portfolio investment refers to…?

Answer 1

Portfolio investment refers to the purchase of financial assets, such as stocks, bonds, or mutual funds, in a foreign country without gaining direct control over the business or operations. It is a passive form of investment aimed at generating returns through dividends, interest, or capital appreciation, rather than managing or influencing the company.

Question 2

Foreign Direct Investment vs Portfolio Investment:

Foreign Direct Investment (FDI)

Answer 2

Foreign Direct Investment (FDI) is when a company or individual from one country invests in a business or assets in another country, typically by establishing operations, acquiring a stake in a company, or expanding business activities. Unlike portfolio investments, FDI involves significant control or influence over the foreign business, promoting economic growth, job creation, and technology transfer.