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 For the uninitiated, every nook and cranny of this famed street is littered with fashion boutiques, eateries and tutoring shops. Droves of teens, afraid to lose out on the latest trends, flock the outlets to pick out the up-and-coming fad. Since trends come and go quickly, it's not difficult to understand why the shops have a difficult time staying in business.

As I've heard about the ups and downs of her business, I earlier advised her to keep her excess earnings in cash or money-market funds. Obviously, this suggestion has worked out well due to the volatile nature of her cash flow. Her dresses would sell like hotcakes during the hot wedding months of November and December. However, those earnings would quickly be depleted by the expenses owed to her seamstress team and landlord. Her annual net earnings were negligible.

Today, her business appears to be in better shape. Having survived the crucial first two years when most start-ups fail, she has picked up an uncanny sense for gauging the preferences of her teen and yuppie clientele. As a natural fashionista, she has even started to set the trend in some of her fashion articles. On top of this, her years in the business have given her a steady stream of repeat customers and references. As the business has started to stabilise, she has begun to see some excess cash, which can be put to better use.

How should she and other young entrepreneurs invest their money? To answer this question, we should start by looking at the financial endgame and working backwards. Essentially, a prime objective would be to save for retirement. We can of course account for a few discretionary big-ticket items to indulge upon along the way. Next, since many young entrepreneurs may not have accumulated a sizeable asset base yet, they are basically unable to invest in direct real estate and other big-lot investments. In fact, the most realistic vehicle for now would be to invest in mutual funds.

Although their investment universe is limited to mutual funds, they have a wide range of funds to choose from. To simplify the decision, let us assume that there are two options: high-risk and high-return equity funds or low-risk and low-return fixed income funds. Which option should they pick?

The decision between equity and fixed income is never easy. Conventional wisdom tells us to match our investment decision with our objectives. One can argue that since they have earmarked this amount for their retirement, which is decades down the road, they could safely put a sizeable amount into equity or stocks.

However, I would beg to differ. While it is reasonable for a certain group to consistently invest in stocks that have a high return potential, this allocation should be reserved for people who have a consistent stream of income - such as salaried people. For my sister-in-law who owns a boutique fashion shop and other young entrepreneurs out there, I believe that their "day job" is already subject to much risk. Their career as an entrepreneur already provides them with earnings that imitate owning stock. A prudent solution to consider would be to balance this risk through investing in less-risky fixed income investments.