Which of the following is not an example of indirect investment by a household?

Which of the following is not an example of indirect investment by a household?

a) investment in a mutual fund’s shares.

b) investment in an original offering of corporate securities.

c) investment in life insurance.

d) savings deposit in a commercial bank.

Answer: d) savings deposit in a commercial bank.

Thus, a deposit in a commercial bank is not an indirect investment of a household. It is regarded as a form of direct investment, as it is a technique of investing abroad that implies a direct control of an investment in a foreign company by the parent company.

Portfolio investment means investment in assets and securities involve the indirect investment by using the intermediary like mutual fund, pension fund, or other affiliated companies. These intermediaries combine small amounts of money from several investors and invest it in a form of securities pool.

On the other hand, a savings deposit in a commercial bank is more of a direct investment in which the household invests its money directly into a saving account in the said bank. These deposits the bank can then use to provide loans and other forms of investments in other financial securities.

Examples of indirect investment by a household comprises of mutual fund shares where the middle or final holder does not own the shares of the company but invest via funds which invest in shares on their behave and life insurance policies where the insurance institution invests on behalf of the policy holder