Direct Investment

Direct investment plans have been in operation since the early 1960s. These plans are not commonly known and used, though a lot of of them offer the benefit of no-fee investing. When they were first introduced they were known as ‘dividend reinvestment plans,’ and when they were approved by the US Securities and Exchange Commission the conditions barred the businesses from promoting the plans. Usage was restricted to people who bought shares recorded in their own names.


Some plans require that you already own stock in the company or are an employee before you may participate. Usually you will not be allowed to buy or sell your securities at a specific time or market price. The company will, instead, buy or sell shares for the plan at established times, for instance on a monthly, weekly or daily basis, and at an average market price. If the company offers a dividend reinvestment plan, you can have any cash dividends received automatically reinvested to purchase more shares.

A direct investment can also be defined as one that is large enough to have an effect on a company’s subsequent decisions. Sometimes this is a noteworthy minority ownership, but in most cases direct investment constitutes a majority shareholder.


In order to have a controlling interest, the percentage of stock held by a shareholder has to high enough to enable him or her to call for high-level changes. This number is, by definition, fifty percent of outstanding or voting shares, plus one. On the other hand, even shareholders holding much less than fifty percent of outstanding shares can cause a lot of shake-ups in a large public company.

Direct investment plans have been in operation since the early 1960s. These plans are not commonly known and used, though a lot of of them offer the benefit of no-fee investing. When they were first introduced they were known as ‘dividend reinvestment plans,’ and when they were approved by the US Securities and Exchange Commission the conditions barred the businesses from promoting the plans. Usage was restricted to people who bought shares recorded in their own names.

Some plans require that you already own stock in the company or are an employee before you may participate. Usually you will not be allowed to buy or sell your securities at a specific time or market price. The company will, instead, buy or sell shares for the plan at established times, for instance on a monthly, weekly or daily basis, and at an average market price. If the company offers a dividend reinvestment plan, you can have any cash dividends received automatically reinvested to purchase more shares.

A direct investment can also be defined as one that is large enough to have an effect on a company’s subsequent decisions. Sometimes this is a noteworthy minority ownership, but in most cases direct investment constitutes a majority shareholder.

In order to have a controlling interest, the percentage of stock held by a shareholder has to high enough to enable him or her to call for high-level changes. This number is, by definition, fifty percent of outstanding or voting shares, plus one. On the other hand, even shareholders holding much less than fifty percent of outstanding shares can cause a lot of shake-ups in a large public company.

Another definition of direct investment is purchasing or acquiring a controlling interest in a foreign company by means other than buying shares outright. Direct investments can entail joint ventures, management participation or the sharing of skills and technology. The investing company may also make its overseas investment by setting up an associate or subsidiary company in the foreign country, or through a merger.

Foreign direct investments differ considerably from indirect investments (for example portfolio flows), in which overseas organizations invest in equities listed on a nation’s stock exchange. The Organisation for Economic Co-operation and Development defines the accepted threshold for a foreign direct investment relationship as ten percent. Foreign direct investments create jobs, improve foreign relations and boost the economies of developing nations.

Foreign direct investment is done for several reasons, but mainly to profit from special rights, for example tax immunity offered by the target country as an enticement, to benefit from cheaper labour costs and to get tariff-free entry to the markets of the country or the region. Other incentives offered by the target country may include soft loan or loan guarantees, free land or land subsidies, and derogation from regulations.

Direct investment has several different meanings, but each definition can produce significant returns for individual and corporate investors. As with any other type of investment, it is important to research any company you’re considering for a direct investment relationship, and never, ever invest funds that you cannot afford to lose.