Abstract

555. The portfolio investment component of the financial account covers transactions in equities, other securities, and financial derivatives—except when these transactions relate to the direct investment or reserve assets components of the financial account. Both short- and long-term instruments are covered under portfolio investment. The essential characteristic of instruments classified as portfolio investment is that such instruments are traded or tradable. That is, the instruments offer investors the flexibility to shift, regardless of the underlying maturity of the instrument, invested capital from one instrument to another. Portfolio investors are more concerned than direct investors about rates of return that are independent of any influence investors may have and about being able to move funds quickly if circumstances so dictate.