Explanation - All statements are correct. With FDI, investors are able to exert control over their investments and are typically actively involved in the management of the companies they invest in. Conversely, in FPI the degree of control is less as the investors obtain only ownership right. Therefore, they do not get a say in how their investments pan out because they're not actively involved in the management or operations of the companies that they're invested in. One of the most important distinctions between portfolio and direct investment to have emerged in the era of globalisation is that portfolio investment can be much more volatile. Changes in the investment environment in a country can lead to swift changes in portfolio investment. In contrast, FDI is more difficult to pull out or sell off as it implies a controlling stake in a business, and often connotes ownership of physical assets such as equipment, buildings and real estate. FDI investors invest in financial and non-financial assets like resources, technical know-how along with securities. This is contrary to FPI, where investors invest only in financial assets. For an economy as a whole, FDI creates productive assets by investing in factories, machinery & skill and superior technology. In that sense, FDI brings in long-term capital for an economy. FPI doesn't aid productive asset creation directly. It is just a financial investment. The FPI investment pours funds generally into capital or bond markets for a short period of time, usually enough to make profits. Its destination period is small and its funds are generally considered short term capital.
Explanation - All statements are correct. With FDI, investors are able to exert control over their investments and are typically actively involved in the management of the companies they invest in. Conversely, in FPI the degree of control is less as the investors obtain only ownership right. Therefore, they do not get a say in how their investments pan out because they're not actively involved in the management or operations of the companies that they're invested in. One of the most important distinctions between portfolio and direct investment to have emerged in the era of globalisation is that portfolio investment can be much more volatile. Changes in the investment environment in a country can lead to swift changes in portfolio investment. In contrast, FDI is more difficult to pull out or sell off as it implies a controlling stake in a business, and often connotes ownership of physical assets such as equipment, buildings and real estate. FDI investors invest in financial and non-financial assets like resources, technical know-how along with securities. This is contrary to FPI, where investors invest only in financial assets. For an economy as a whole, FDI creates productive assets by investing in factories, machinery & skill and superior technology. In that sense, FDI brings in long-term capital for an economy. FPI doesn't aid productive asset creation directly. It is just a financial investment. The FPI investment pours funds generally into capital or bond markets for a short period of time, usually enough to make profits. Its destination period is small and its funds are generally considered short term capital.