What’s an accredited investor and what can you do?

Being an accredited investor opens the door to certain more lucrative investments that non-accredited investors don���t have access to. Here’s how to know if you are qualified or not.

What is an accredited investor

An accredited or sophisticated investor is an investor with a special status under financial regulation laws. The definition of an accredited investor, and the consequences of being classified as such, change for every country.

Figuring out whether or not you’re an accredited investor is easy. To be an accredited investor in the U.S. you need to meet certain income or net worth requirements.  

These are the two ways to qualify:

Accredited investor income test

To be an accredited investor you have to have earned $200,000 (or $300,000 combined income if you are married) annually for the past two years with the expectation of earning the same or higher income in the current year, 

Accredited investor net worth test

The other way to become an accredited investor is if your net worth exceeds $1,000,000 without including your primary residence. 

Where can you invest?

If you qualify as an accredited investor you will be able to invest money directly into the lucrative world of private equity, real estate crowdfunding, private placements, hedge funds, venture capital, and equity crowdfunding

A major benefit of becoming an accredited investor is that you can expect greater returns.

No agency issues accredited investor status and there is no certification exam you must take. Instead, the firms selling unregistered products engage in their own screening process to verify whether an individual is an accredited investor or not.

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