Types of Foreign Investments

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 folio foreign investment is made in stock exchange by foreign investors. in port folio investment you are not directly involve in business operations.

Advantages of Portfolio investment:-

Easy to Dis-invest

The first advantage of port folio investment is that you can play safe and any time if you feel that your investment is at risk you can dis-invest your investment immediately. The all you need to call your broker to sell your shares in the market or you can also enter to your account online and sell your shares at market price.

Minimum Regulatory Requirement

The portfolio investment does not require much legal formalities .In many countries you enter into the market with the help of broker . You does not required non objection certificates from dozen of department to start a new business and need not to face red tap-ism in case of port folio investment.

Minimum Political Risk

The many political risk like civil war , political instability may be reduced due to port folio investment as discussed earlier that investment can be easily withdrawal from the stock exchange. The investor give great consideration to risk factor and in case of port folio investment many risk are minimized to acceptable level.

Financial Risk can be managed by diversification of portfolio

The risk management in port folio investment is much easier than direct investment . The all you need an expert to diversify your investment in accordance with internationally accepted rules and procedures. it is important to know that diversification does not total eliminate the financial risk it just minimize the financial risk. 

Public information is available for informed decision making

In port folio investment you can make more informed decision as you have access to wide information available on stock exchange about companies . you can also get detail market analyses from the financial newspaper and magazines. So there is a lot of free advice available for you investment decision. you can also get expert views about the investment from your broker or financial expert of the market.

2.Direct Investment 

The direct foreign investment is other than investment in stock exchange. in direct investment you are directly or indirectly involve in production or service provision.There are different types of foreign direct investment. 

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