If you are new to the world of investing, you may have yet to become familiar with the term “accredited investor.” Or, maybe you are familiar with what accredited investor status means but do not yet know how to qualify as one or all the benefits of becoming one.
What is an Accredited Investor?
An accredited investor can be a person or an entity that qualifies to purchase securities in a company that is not registered with the SEC or financial regulatory bodies. The word “accredited” implies that the individual or entity has fulfilled the requirements to achieve accredited investor status. Investors having this status have met the required criteria based on one or more factors, such as net worth, income, or others.
What Can You Do As An Accredited Investor?
You may wonder what you can do with the status of an accredited investor. Generally, the law requires companies to register their securities offerings with the SEC. However, there are some exceptions available. One involves selling securities to accredited investors. Being able to bypass the trouble of registering securities with the SEC is an incentive to companies to offer their investment options to these qualified, accredited investors.
Some of the investment opportunities available to those with accredited investor status include:
- Private equity funds
- Venture capital funds
- Real estate crowdfunds
- Hedge funds
- Angel investing
Ordinary investors can invest in stocks, mutual funds, and bonds. However, as an accredited investor, your opportunities increase. The investment options available are more exclusive to a select group because the risks and potential benefits are higher. This is why investing as an accredited investor should always be done with caution.
Benefits of Being an Accredited Investor
As we mentioned previously, gaining accredited investor status gives you access to many new investment opportunities. Essentially, you are rewarded with these opportunities for achieving a certain level of income, net worth, or another qualifying factor.
With new investment options as an accredited investor, you will likely have the opportunity to earn higher rates of return, enabling you to build wealth at a faster pace than previously. As someone with accredited investor status, you can also effectively diversify your portfolio Foran example, and you can invest your money into a large real estate crowdfunding project or place some money into a hedge fund. The possibilities are many and varied.
