It’s extremely common for investors to invest outside of their own country in order to create a diverse portfolio. That could be done by purchasing shares or bonds in a foreign company, for example. However, an alternative to owning a foreign business’s securities is outright capital investment. This is called ‘foreign direct investment’ (or FDI).
The definition of foreign direct investment is the act of acquiring a large stake in a foreign company or project. For example, a business could decide to buy a foreign company in order to expand operations to a new location. This can be a good investment for a party that is interested in establishing a lasting interest in another country.
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