Investment activity

INVESTMENT ACTIVITY

In economic science investment is capital expenditure on assets. Real investments usually deal with tangible assets. As a financial term investment -means purchases of stock exchange securities -or deposits of money in banks or other financial institutions with the purpose of in­come or capital gains. Investment is connected with other aspects of economy such as the role of financial centres, labour migration and the regime of international trade.

There are two main channels for international investment: foreign direct investment (FDI) and foreign indirect investment, or portfolio investment.

Foreign direct investment (FDI) happens when individuals or le­gal entities of one nation (the «home» nation) get managerial control of economic activities in some other nation (the «host» nation). Per­forming an operation through a joint venture, establishment of a for­eign subsidiary are examples of foreign direct investments.

Firms controlling activities in several nations are known as «mul-tinational enterprises» (MNSs), transnational corporations)) (TNCs) and «global corporations)).

FDI has a positive effect because it speeds the international diffu­sion of new technologies and in many national markets it stimulates competition among firms.

The process of supplying capital to a foreign institution, through a loan or purchase of securities is foreign indirect investment.

In financial circles, if individuals and legal persons have securities they are called individual investors. Institutional investors are a group of investors who have funds to invest. This group includes insurance com­panies, banks, investment trusts, financial and industrial companies.