Consider the following statements with respect to the Foreign Portfolio Investments (FPI):

  1. FPI involves the purchase of stocks, bonds, commodities or money market instruments
  2. FPI does not provide the investor with direct ownership of financial assets

Which of the above is / are correct statements?

Answer: [C] Both 1 & 2

A foreign portfolio investment is an investment activity that involves the purchase of stocks, bonds, commodities, or money market instruments that are based in a different country. Securities and other financial assets passively held by foreign investors. Foreign portfolio investment (FPI) does not provide the investor with direct ownership of financial assets, and thus no direct management of a company. This type of investment is relatively liquid, depending on the volatility of the market invested in. It is most commonly used by investors who do not want to manage a firm abroad.

This question is a part of GKToday's Integrated IAS General Studies Module