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Portfolio Investment

Portfolio investment involves the purchase of financial assets such as stocks, bonds, mutual funds, or real estate for the purpose of generating returns over time. Unlike direct investments, portfolio investments do not give investors control over the management of the underlying assets. Instead, they provide opportunities for capital appreciation, interest, or dividend income. Portfolio investments are often part of a broader strategy to diversify risk and achieve long-term financial goals.

Example

An individual buys shares in an international mutual fund as part of their portfolio investment strategy to gain exposure to foreign markets and diversify their risk.

Key points

• Purchase of financial assets like stocks and bonds to generate returns.

• Does not involve control over the management of the assets.

• Aims for capital appreciation, interest, or dividend income.

Quick Answers to Curious Questions

Portfolio investment focuses on returns from financial assets without control over the business, while direct investment involves ownership and management influence.

It helps investors spread their exposure across different asset classes and markets, reducing the impact of risks in any one area.

They provide opportunities for growth and income through capital appreciation and dividends, aligning with long-term financial goals.