Synopsis: Entrepreneurs and small business owners can use investments as a second source of income to scale their operations. While the best investment strategy will depend on your business goals, here are seven tips to help you generate high returns.

Building a business from the ground up and keeping it running requires hard work, determination, and endurance. But what if your capital is limited? One option is to look into passive income methods, such as investing.  

Creating wealth for your company requires investing in the correct instruments that bring in money when your cash flow is low. To know more about it, read our blog on the basics of financial literacy.   

This article will share seven tips that will help you generate high returns. Let’s begin by understanding how investing can benefit your business. 

Why Is Investment Knowledge Important? 

Understanding investments can help you make informed choices, invest intelligently, and shape your business’s future. Here are some reasons why you should have a good understanding of investments: 

  • Financial Security: An investment strategy can help you build a financial safety net. It can ensure you are better prepared to weather economic downturns or personal financial emergencies. 
  • Risk Management: It can help you understand the risks of your investments, helping you make informed decisions. 
  • Tax Efficiency: Understanding investment strategies can help you optimize your tax liabilities. For instance, investing in an Equity-Linked Savings Scheme (ELSS) allows you to claim tax rebates. 
  • Diversification: If you have substantial investment knowledge, you can diversify your assets instead of having them tied up in one asset. 

Benefits Of Investments In The Long Run 

While stock prices fluctuate, sometimes wildly, over short periods, they can generate steady returns when you hold them for a long time. Some more ways through which investments help you in the long run are: 

  • Wealth Accumulation: Well-managed investments can lead to substantial wealth accumulation. It can allow you to scale your business or achieve personal goals such as funding your children’s education. 
  • Additional Income: Investments serve as an additional income stream for your business. For example, dividends from stocks, interest from bonds, or rental income from real estate can supplement the business’s cash flow, improving its financial stability. 
  • Retirement Planning: By consistently contributing to retirement schemes, you can accumulate wealth over time, ensuring financial security during retirement. 

7 Investment Tips To Generate Better Returns 

Here are seven investment tips for small business owners and entrepreneurs that will help you maximize your returns and minimize risk: 

1) Diversify Your Portfolio 

Goal: By diversifying your portfolio, you can reduce your dependency on one asset class and maximize stability of your business’ investments.  

As a rule, don’t put all your eggs in one box. Instead, spread your money across different asset classes or industries.  

For instance, you might invest 60% of your portfolio in equities, 30% in bonds, and 10% in real estate. This way, if one asset class or industry underperforms, the others can help offset potential losses. 

2) Have An Exit Strategy 

Goal: The goal of exit strategy is that it prevents you from taking impulsive decisions, so you don’t lose your hard-earned money to market volatility. 

Establish a clear exit strategy for selling an investment, such as a pre-determined profit target or a specific event trigger. This will help you make rational decisions based on your financial goals rather than reacting impulsively to market fluctuations. 

For example, you purchased shares of a tech company at Rs 50 per share, and your goal is to earn a 20% return. So, you should sell your shares when the stock price reaches Rs 60 per share. 

3) Hedge Against Inflation 

Goal: Don’t let your cash flow management efforts go to waste. If you have surplus cash, invest it into assets that appreciate in value, so you can beat the inflation. 

Consider investments that historically outpace inflation, such as stocks, real estate, and commodities like gold. These assets tend to be appreciated over the long term and can preserve your wealth.  

For instance, you can invest in real estate, providing you with rental income and property appreciation, outpacing inflation. 

4) Keep Some Cash On Hand 

Goal: If your cash flow management permits having some cash in hand, the goal is to set some aside. 

If the stock market falls suddenly, having cash on hand allows you to buy shares at a lower price. This process is called ‘buying on the dip,’ it can help you maximize your gains over time. 

Some reasons why you should have cash on hand are: 

  • Provides comfort during market instability. 
  • It helps keep your operations running when funds are tight. 
  • Works as an emergency fund to help you tackle unforeseen situations such as system crashes and natural disasters 

5) Consider Debt Mutual Funds 

Goal: Debt mutual funds provide you with a reliable source of passive income while helping you battle market volatility. 

Debt mutual funds invest in various debt instruments or fixed-income securities such as bonds, treasury bills, and money market instruments. These fund instruments have a fixed term, and investors receive interest until maturity.  

Debt funds are also considered less risky than equity investments and offer stability to investors. The fund manager allocates assets across these securities based on their credit quality, duration, and yield. 

6) Have A Tax Strategy 

Goal: A well-thought-out tax strategy helps you minimize the taxes on your investments, this can improve your yearly cash flow. 

By having an effective tax strategy, you can optimize your tax liabilities and maximize your after-tax income. It involves investing in schemes with tax benefits, taking advantage of deductions, and staying up to date with the tax laws. 

For example, you might invest in an ELSS. Under Section 80C of the Income Tax Act of 1961, if the principal amount for an ELSS scheme is less than Rs 1.5 lakhs, it is exempt from taxes. 

7) Invest In Penny Stocks 

Goal: Penny stocks often deliver rapid growth in a short period, allowing you to boost your cash flow from passive income. 

A penny stock is a common stock that sells for less than Rs 10 on the market. As a small business owner, you can start trading penny stocks. This can help you learn about the market and enhance your financial skills while making some passive income.  

Once you’ve mastered penny stock trading, you can either continue with it or go on to other types of assets. 

Schemes For Entrepreneurs And Small Business Owners 

Some investment schemes you can look into are: 

  • Pradhan Mantri Mudra Yojana (PMMY): The scheme provides small business owners with loans of up to Rs 10 lakhs, with no collateral required for loans of up to Rs 50,000. 
  • A Scheme for Promotion of Innovation, Rural Industries and Entrepreneurship (ASPIRE): It offers financial assistance so you can establish livelihood business incubators. It also covers technology business incubators in the form of a one-time grant, equipment cost (excluding land and infrastructure) or an amount up to Rs 100 lakhs, whichever is less. 
  • Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): The scheme offers small enterprises collateral-free loans of up to 75% of the loan amount, with a maximum coverage of Rs 50 lakhs per borrower. 


Market investments are an excellent way to maintain a positive cash flow and grow your business. They serve as an additional source of income you can re-invest in the business, save for emergencies, or use to pay off debtors. 

These investment tips will help you come with an investment strategy that aligns with your business objectives. However, before deciding one, conduct due research and read up on their risks.