There are many opportunities available out there that are only offered to accredited investors. This brings up two questions: 1) what is required to qualify as an accredited investor and 2) once a person qualifies as an accredited investor, what types of investment opportunities are available for them to invest in?
Requirements to Qualify as an Accredited Investor
There are a number of requirements necessary in order to qualify and get accredited investor status. These include, but may not be limited to the following:
- A corporation, charity or partnership with assets greater than $5 million
- An insurance company, bank, or registered investment company
- An individual having a net worth greater than $1 million (not including the value of the individual’s primary residence)
an individual having an income greater than $200,000 in each of the previous two years (or having a joint income with a spouse greater than $300,000 in those years) and with a reasonable expectation of exceeding that amount in the same year - An executive officer, director, or general partner of a company selling securities (they are only “accredited” for the purpose of purchasing securities from their company)
- An Employee Retirement Income Security Act benefit plan with more than $5 million in total assets
- A business entity in which accredited investors account for all of the individual equity owners; or
- A trust having assets greater than $5 million
Investment Opportunities
It’s not possible within the scope of the information presented here to cover all the different types of investments that are available to accredited investors. However, below are a few that are available.
- Hedge funds: these are definitely only restricted to accredited investors.
- Startups: Angel investors can serve as accredited investors for startups and private companies
- Private equity: the entire investment range of nonpublic investments are covered under private equity. These normally raise money from non-institutional institutional investors.
- Real estate crowdfunding: Most of the platforms involving real estate are available exclusively to accredited investors
It certainly is possible for you to go a long time, possibly even a lifetime, without considering or even purchasing the type of investment that requires accredited investor status.
However, if you do invest in an investment that does not require accredited investor status, you may miss out on some of the best investments around. You will need to do your own homework on the investments which may require you to hire third parties such as accountants and lawyers, all of which may take away from the profitability of your overall investment.
