Types of Foreign Investment

Types of Foreign Investment

There are Basically Two types of foreign investment

1. port polio foreign investment
2. Direct Foreign investment

Port folio foreign Investment :- The Port folia foreign investment is made in stock exchange by foreign investors.
Advantages of Portfolio investment:-

1. Easy to disinvestment
2. Minimum regulatory requirement
3. Minimum political risk
4. Risk can be managed by diversification of portfolio

Easy Disinvestment :- The shareholder can off load his position whenever he want. There are number of buyer available in the stock exchange to purchase the share at market rate. The disinvestment decision may be for the meeting cash flow requirement or to earn capital appreciation or rational decision for safe exit.

Minimum Regulatory Requirement :- The direct investment require a lot of formalities and non objection certificate from different department. The problem is more intense in developing countries where there are lacking procedure in this regard. The red tap-ism is also a problem in developing countries and off course one other problem one can face is corruption.

Minimum Political Risk:- The other advantages that many political risk are minimized by port folio investment as the position can be off load immediately.



Direct investment :-

The direct foreign investment is other than investment in stock exchange. There are different types of foreign direct investment.

1. Joint Ventures Arrangements
2. Licensing Arrangements
3. Foreign Subsidiary
4. Foreign Branches