If you don’t have much experience as an accredited investor, your knowledge might be limited to the fact that it allows you to potentially make big money. However, that opportunity also comes with more rules than what typical investments are subject to.
Only certain groups of people qualify to take advantage of those options. The rules surrounding investing often change over the years, but Fortune Builders shared the latest on accredited investments as of 2022.
How Do You Become an Accredited Investor?
Before getting too excited about what you can do with this opportunity, it’s important to ascertain if you even meet the criteria.
Accredited investors are given a rare opportunity that deliberately leaves many people not eligible.
In short, only people who are considered highly knowledgeable about how to maintain their finances are allowed to get into these investments. Such people include any one of the following:
- An individual whose annual salary exceeds $200,000.
- A married couple whose combined salaries exceed $300,000.
- An individual whose net worth exceeds $1 million.
- Individuals with certain professional licenses classify them as being considered knowledgeable of financial risks.
- Businesses owning over $5 million in assets.
There are other qualifiers that can make you eligible, but those listed are some of the most common ones.
What Advantages Do Accredited Investors Get?
So you qualify to be allowed in this distinguished group, but what exactly does that get you? Essentially, you are given access to investments that are considered too high risk for the general public. You can lose more money much faster with accredited investments, but people take that risk for the flipside of getting a bigger profit much faster. Some examples of these types of investments include:
- Crowdfunded real estate projects where you and others combine assets to purchase a property that might be too pricey for you individually
- Angel investments where you are basically putting your money into a startup business in the hopes that it succeeds and gives you a significant return
- Private equity funds
- Venture capital funds
- Hedge funds
Fred Hubler, CEO and Chief Wealth Strategist for Creative Capital Wealth Management Group, who built his company on researching and analyzing accredited investments for his clients, believes clients should have a small (no more than 25%) allocation to accredited investments focused on reducing the overall risk of portfolios while usually increasing income and or growth.
“The hardest part, according to Hubler, “is explaining the investments to sophisticated investors who have never been exposed to accredited investments.” Hubler and his team at Creative Capital spend a lot of time educating clients as to the legitimacy of these investments.
Some accredited investments also have high minimum investment rates, meaning the risk can be hard to avoid. That is why you need to be cognizant of how each investment works and how much you can afford to lose when one inevitably does not pan out.
Want more details on how to make your start as an accredited investor? Fortune Builders has more great info to help you out here.
Want to know if you’re on the right path financially? CCWMG’S Second Opinion Service (SOS) is a no-obligation review with one of Creative Capital Wealth Management Group‘s Wealth Strategists.
It’s simply not possible to get a reliable second opinion from the same person who gave you the first one. Click here to schedule an SOS meeting with Fred and his team.