Portfolio investment

From Wikipedia, the free encyclopedia

In economics and finance, Portfolio Investment represents passive holdings of securities such as foreign stocks, bonds, or other financial assets, none of which entails active management or control of the securities' issuer by the investor; where such control exists, it is known as foreign direct investment.

Some examples of portfolio investment are:

• purchase of shares in a foreign company.
• purchase of bonds issued by a foreign government.
• acquisition of assets in a foreign country.

Factors affecting international portfolio investment:

• tax rates on interest or dividends (investors will normally prefer countries where the tax rates are relatively low)
• interest rates (money tends to flow to countries with high interest rates)
• exchange rates (foreign investors may be attracted if the local currency is expended to strengthen)

Portfolio investment is part of the capital account on the balance of payments statistics.