Direct Investment

Direct investment occurs when an individual or company invests directly into a foreign company or asset, gaining significant control over the business operations. This type of investment is often referred to as Foreign Direct Investment (FDI) when it crosses borders. Direct investment typically involves acquiring a stake in a company, setting up new business operations, or reinvesting profits back into the business. Direct investment helps investors gain long-term returns through dividends or capital appreciation, while the recipient company benefits from additional capital, expertise, and technology.

Example

A U.S. company opens a factory in China, making a direct investment in the country’s manufacturing sector.