What characterizes portfolio investment?

Portfolio investment is characterized by the purchase of shares of stocks or bonds. This type of investment involves acquiring financial assets rather than directly controlling or operating businesses. Investors engage in portfolio investment primarily with the goal of gaining a return on investment through capital gains and income from dividends or interest payments. Unlike direct investment, which entails taking an active role in the management of a foreign company or establishing a physical presence, portfolio investment remains more passive in nature. It allows individuals or institutions to invest in a diverse range of securities without the implications of hands-on involvement in business operations, thereby providing liquidity and the ability to easily diversify an investment portfolio.