This does not provide the foreign investor with direct ownership of the financial assets and can be relatively liquid depending on the volatility of the market that the investment takes place in.
It is also part of the balance of payments which measures the amount of money flowing in and out of a country over a given time period.
[5] These transactions are also referred to as "portfolio flows" and are recorded in the financial account of a country's balance of payments.
[6] Foreign portfolio investment is positively influenced by high rates of return and reduction of risk through geographic diversification.
The returns on foreign portfolio investment can come from interest payments, non-voting dividends, increases in the market value of securities held in the portfolio, the foreign currency becoming stronger relative to the home currency, or some combination of the previous factors.