Each Country needs money for its profitable widening also the funds can’t be elevated from just its domestic sources only. In this fast-developing world, The two main and well-needed kinds of foreign capital are Foreign Portfolio Investment (FPI) and Foreign Direct Investment (FDI).
FDI
relates to the foreign investment where the investor gets a lasting
interest in an enterprise in another country. It involves establishing a
direct business interest in a foreign country, such as buying or
establishing a manufacturing business, building warehouses, or buying
buildings. Also, it tends to involve creating more of a substantial,
long-term interest in the economy of a foreign country. FDI can also be
made through different methods like creating a joint venture, through
merger and acquisition, etc.
Foreign Portfolio Investments (FPI)
refers to investing in the financial assets of a foreign country, such
as stocks or bonds available on an exchange. It includes the buying of
securities that can be easily bought or marketed. Hoping to generate a
fast return the main motive of FPI is to invest money into a foreign
country’s stock market.
DIFFERENCE BETWEEN FDI AND FPI
In the case of FDI, it is an Active Investment
But in the case of FPI, it is a Passive Investment.
FDI- It is Direct Investment
FPI- Indirect Investment
FDI- Long Term Capital
FPI- Short Term Capital
FDI- Invests in financial and non-financial assets
FPI- Invests only in financial assets
FDI- Ownership and managerial control
FPI- Only ownership
FDI- Stable
FPI- Volatile
FDI- Entry & exit barriers exist
FPI- Entry & exit very easy
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