Entrepreneurs have become the core of Indian business, with new startups launched constantly to boost the Indian economy. However, as entrepreneurs are initially responsible for funding their businesses, investing can provide an ideal way to multiply their funds, which they can use to further expand their businesses.
This article will provide investment tips for entrepreneurs in India and explain how entrepreneurs should invest in businesses.
Can investment tips help entrepreneurs generate better returns?
Investing in the Indian capital market is a complex task, as thousands of investment instruments have different levels of risk and return. Furthermore, not every investment strategy aligns with an entrepreneur's personal goals. However, some basic investment tips can help entrepreneurs streamline their investments, ensure they make informed investment decisions, and earn better returns.
Top 8 investment tips for entrepreneurs
Here are the top 8 investment tips for entrepreneurs:
1. Invest in the long-term
Long-term investing, also called value investing, is crucial for building wealth. When you invest for the long term, you don’t have to sell at a loss, as you can wait for the market to stabilise. Steadily, as the company performs well, you can earn through dividends and capital appreciation.
2. Find and understand adviser disclosure
Investment advisers can help in ensuring you invest in high-performing assets. However, you should analyse and compare investment advisers based on their disclosures. These disclosures contain information about the adviser’s disciplinary, civil, or criminal actions.
3. Know your level of risk tolerance
Determine how much risk you can comfortably take without potential investment losses creating a financial burden. Determining your risk tolerance will help you compare various investment instruments based on their risk exposure.
4. Look at potential stocks like an owner
As an entrepreneur, you know how a good business should look financially. When investing, think of the company as your own and analyse it to understand if it has the potential to grow in the future. Only when you are satisfied should you invest.
5. Make your investments count
Before investing, ensure that you have done extensive investment and market research. Make your investments count by constantly monitoring them and adjusting your holdings to limit losses and generate better returns.
6. Spread out your investments from the get-go
Putting all your eggs in one basket is never a good idea. When investing, ensure that you diversify by investing in multiple investment instruments to spread the risk of losses. Profit from one investment will help offset loss from another.
7. Know when the right time to sell is
Analyse market trends and execute extensive investment research to determine whether a security is overvalued and when to book profits or sell. You can use tools such as a stock return calculator or mutual funds calculator to identify an ideal exit point.
8. Flexibility can serve you well
Flexibility is vital to earn good returns as an entrepreneur. Be flexible enough to learn about new investment strategies and cut your losses if an investment fails. Furthermore, seek expert help if you feel you are not well-versed in investing.
Example of how should entrepreneurs portfolio look like
Now that you have read the top investment tips for entrepreneurs in India, here is an example of how an entrepreneur’s portfolio should look like for better understanding:
Let’s say an entrepreneur wants to invest Rs. 10,00,000. Here is an ideal asset allocation and diversification:
- Total portfolio value: Rs. 10,00,000
- Asset allocation in stocks = 70% (Rs. 7,00,000)
- Asset allocation in debt instruments = 20% (Rs. 2,00,000)
- Asset allocation in cash or cash equivalent = 10% (Rs. 1,00,000)
Although this is an ideal allocation plan, it should change depending on an entrepreneur’s investment goals, financial situation, and risk appetite.
Mutual funds and investment schemes for entrepreneurs
Mutual funds are investment instruments that pool investor money to invest in a wide range of securities. Mutual funds can prove ideal for an entrepreneur’s portfolio as they can choose from a host of mutual fund schemes, such as equity schemes, debt schemes, hybrid schemes, and target maturity funds.
Investing in mutual funds can help entrepreneurs achieve effective diversification and ensure they invest systematically to build wealth over time. By strategically choosing mutual funds and investment schemes, entrepreneurs can build a robust portfolio that supports their financial objectives and complements their business ventures.
High-return mutual fund categories for smart investing
Conclusion
Investing in the stock market and other asset classes can prove beneficial for entrepreneurs, ensuring they generate better returns to use personally and grow their businesses. Now that you know how entrepreneurs should invest in businesses through earnings from the stock market, you can also do the same and secure enough funds to invest in your business.
You can visit the Bajaj Finserv Platform to explore numerous mutual fund schemes and utilise tools such as mutual fund calculators to select mutual funds for a balanced portfolio.
