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. Generally, this means the investor holds less

than 10% of the total shares or less than the amount needed

to hold the majority vote.

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 expected to strengthen)

Portfolio investment is part of the capital account on the

balance of payments statistics