Modern Communications Infrastructure Makes It Possible For Anyone With A Bank Account

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Modern communications infrastructure makes it possible for anyone with a bank account to make a “foreign portfolio investment” (FPI). Rich and poor alike can gain from this ability to trade stocks and bonds overseas with speed and ease. For those with sufficient resources, however, a “foreign direct investment” (FDI) can also be made. While both types of investment can be lucrative for the investor, I believe that foreign direct investments are usually better for the country receiving the investment, and so FDIs should be the favored form of investment for those with the means to make them. For an investor, FDIs and FPIs are both excellent options from a financial standpoint. Any investment that helps a company to grow will tend to be…show more content…
FDIs do not share these conveniences. This sort of investment often involves building factories, buying machines, or purchasing a significant portion of a company’s voting shares (Levin, 3). For example, a Chinese manufacturer could decide to purchase a mine in Russia after learning that raw materials are cheaper and more abundant there. Such an investment would require a large amount of money to make the purchase, as well as knowledge of how to effectively run a mine and transport the product to Chinese factories. Acquiring and properly using these major assets often requires a significant amount of both money and expertise. In addition, the ability to guide a company to operate more efficiently is a big part of the appeal of FDIs. Because of this, it is often useful to hold these sorts of assets for an extended period of time, allowing for improved policies and technologies to be implemented and become productive. This can make it inconvenient to sell such investments on short notice, especially in response to economic downturns. While the risk associated with this inconvenience can often be lessened by appropriate research prior to making such an investment, it serves as another barrier to entry for those without the expertise required to properly perform such research. Despite these disadvantages, the benefits associated with an FDI can make it a very appealing option for those with the resources
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