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When you become an accredited investor, you are in the elite group of people who have the financial means and regulatory clearance to make investments that others cannot. This can mean exclusive access to hedge funds, venture capital firms, certain investment funds, private equity funds, and more.

The Securities and Exchange Commission argues by becoming an accredited investor, you possess a level of sophistication capable of building a riskier investment portfolio than a non-accredited investor.

While not universally true, at the very least, you have demonstrated you have the financial resources to shoulder more risk should your investments unexpectedly fall in value.

Investment opportunities for accredited investors don’t need to be registered with financial authorities, meaning they come with fewer required disclosures and less transparency than registered securities available to non-accredited investors.

The line of thinking here is your qualification as a sophisticated investor means you understand financial risks, require less disclosure on unregistered securities, and believe investment opportunities for accredited investors offer suitable options for your investment funds.

Let’s learn more about being an accredited investor and review investments worth considering.

What is an Accredited Investor?


woman calculating numbers on tablet with reports

Accredited investors include high-net-worth individuals (HNWIs), banks, insurance companies, securities brokers, and trusts.

An accredited investor may trade securities that do not require registration with financial authorities, like the Securities and Exchange Commission.

The Securities and Exchange Commission believes if you meet at least one of the accredited investor requirements (covered below), you don’t need the financial protection provided by regulatory disclosure filings many of their non-accredited counterparts might need to protect investors.

Many investment firms choose to offer securities directly to this investor class through a private fund or another investment vehicle. These opportunities for accredited investors typically come through private placements.

These types of financial arrangements entail potential risks not seen in traditional investments. Therefore, authorities want to ensure an accredited investor has the financial resources and sophistication to understand these risky ventures before proceeding.

Related: How to Know What Stocks to Buy [Picking Stocks for the Long-Term]

How Does the Securities and Exchange Commission Define an Accredited Investor?


reviewing financial information

While the accredited investor definition recently changed—from one which usually meant high-net-worth/high-income individuals to now one which focuses on investor experience and knowledge—it typically skews more towards investors with financial resources and familiarity.

That said, the new amendments from the Securities and Exchange Commission (SEC) allow investors to qualify as accredited investors based on defined measures of professional knowledge, experience or certifications in place of the existing tests for income or net worth.

These tests for financial resources include having an aggregate net worth of over $1,000,000 and earning over $200,000 in each of the two most recent years or joint income with that person’s spouse over $300,000 in each of those years with a reasonable expectation of reaching the same income level in the current year.

Knowledgeable employees who work for certain private funds can also participate as accredited investors.

This article will explore how your net worth, income, employment, certification or status as a private business development company or organization with assets exceeding certain thresholds may become a factor when considering what types of investments you can buy.

Related: How to Get Rich Off Stocks [Steps to Invest in the Stock Market]

How Do You Become an Accredited Investor?


coworkers taking notes and working together

To become an accredited investor, you must meet one of the following standards:

  1. You have a net worth (or joint net worth) exceeding $1,000,000 (excluding your primary residence).
  2. You are part of an association or trust with assets exceeding $5,000,000.
  3. Your annual income has exceeded $200,000 in each of the previous two years, and you expect to make the same amount this year.
  4. You must exceed $300,000 of joint income if you have a spouse.

Once you achieve these milestones, you have access to accredited investments through achieving accredited investor status. This allows you to invest in investment opportunities like:

  • private placements
  • online investment platforms catering to accredited investors
  • venture capital
  • hedge fund opportunities
  • private equity
  • real estate deals and certain real estate investments
  • convertible investments

When considering alternative investments for accredited investors, it is essential to look at them through the lens of risk and return, which varies depending on your current financial situation. It would help if you also held other considerations like portfolio diversification and liquidity.

To help with this decision-making process, we’ve created this list of investment opportunities for accredited investors that might be right for you. Of note, traditional investments like stocks and bonds can still present great options for your financial portfolio.

Best Investments for Accredited Investors

1. YieldStreet – Alternative Investments (Financial Securities in Real Estate, Art Finance & More)


yieldstreet sign up

  • Minimum Investment to Start: $500
  • Type of Investor: All Investors

Alternative investments have become increasingly popular as fintech services open up once closed markets to the individual retail investor. These opportunities have democratized numerous markets and unlocked previously-inaccessible cash flows to pad your income from assets.

Yieldstreet is one such platform leading the charge to provide access to income-generating assets in several asset classes.

Yieldstreet is an alternative investment platform that provides you with income-generating opportunities. These investment opportunities come backed by collateral, typically have low stock market correlation, and span various asset classes. Such asset classes include:

  • art finance
  • real estate
  • commercial finance
  • legal finance, and more.

Yieldstreet has been in business since 2015 and has returned over $600 million to its investors since its founding.

Historically, their yields range from 7-15% and have predefined payment schedules (i.e., monthly or quarterly payments). They may pay principal and interest upon the occurrence of certain events (e.g., case settlement within a legal finance investment).

The durations of investment opportunities range from 6 months to 5 years and have investment opportunities starting as low as $500.

Learn more by opening an account now for access to passive income-filled returns on your investments.

Related: 18 Best High-Yield Investments [Safe Options Right Now]

2. CrowdStreet (Commercial Real Estate)


crowdstreet sign up

  • Minimum Investment to Start: $25,000
  • Type of Investor: Accredited Investors Only

CrowdStreet is a real estate investment platform available exclusively to accredited investors looking to invest in commercial real estate for long periods.

The illiquid investments have performed well, but they require you to commit money for a few years, making you leave your money invested in these investments.

Further, CrowdStreet comes with a high minimum investment of $25,000, which shouldn’t come as a significant surprise. The platform caters to accredited investors, whereas platforms that allow non-accredited investors have low minimum investment requirements.

Depending on the type of project chosen, you might be receiving a return immediately through quarterly dividends on the commercial rental properties. You might also choose a project that takes a few years to provide you with money.

 

3. Equity Multiple


equity multiple sign up

  • Minimum Investment to Start: $5,000
  • Type of Investor: Accredited Investors Only

Some platforms like Equity Multiple allow you to invest in individual properties, specifically commercial real estate. Others allow you to invest in real estate property portfolios.

Equity Multiple carries a minimum $5,000 initial investment and comes with a limitation on the type of investors who can participate.

Namely, Equity Multiple only allows its individual commercial real estate projects to receive investments from accredited investors.

For those interested in learning more about Equity Multiple, consider signing up for an account and going through their qualification process.

Related: 36 Best Passive Income Ideas [Income Investments to Consider]

4. Cryptocurrencies


cryptocurrencies

  • Minimum Investment to Start: None
  • Type of Investor: All Investors

Over the last five years, cryptocurrencies have burst onto the scene as an asset class all their own. Cryptocurrency statistics show they’ve come from non-existence to a collective market capitalization of nearly $2 trillion in the last 10 years.

That represents the fastest rise of any asset class in history regarding the magnitude of returns investors have made. A remarkable rise, to be sure. But should you consider adding a position in your portfolio for cryptocurrencies?

Many millennials have stated they see Bitcoin as a better risk-off asset than gold, driving a significant rise in ownership during the COVID-19 market downturn.

The rapid rise in value likely underpins a continual interest in holding at least a small position in cryptocurrencies as we advance.

So, how can you begin investing in cryptocurrencies? Many investing apps offer the ability to purchase major cryptocurrencies like Bitcoin, Ethereum, XRP and more.

The best app I’ve found for investing in cryptocurrency has been eToro. This social investing app allows you to replicate the trades made by professional crypto traders on the platform.

You can also take up the common practice of “HODL” made famous by the crypto community, meaning “hold on for dear life.” This is a long-only focused investment strategy given the inherent warning of embracing the investment and holding through market volatility.

There’s no denying the risks of crypto investing with the wild swings and massive capital flowing into the asset class. This is why you should only consider starting to invest with a small portion of your overall portfolio in this new investment category.

Like nearly all investments, your capital is at risk, and you can lose money. Before proceeding with cryptocurrency investing, make sure you understand the risks involved.

That said, given the rampant interest seen from investors worldwide, it seems like these virtual currencies are here to stay.

One benefit of cryptocurrency comes from harvesting tax losses in your holdings and immediately reestablishing a position in the cryptocurrency.

Because the Securities and Exchange Commission (SEC) doesn’t consider cryptocurrencies securities, you can lock in capital losses without needing to sit out of these alternative investment opportunities.

If this sounds like something worth exploring, try opening an eToro account and making an initial deposit to begin investing in cryptocurrency.

Related: Best Investments for Roth IRA Accounts [Target High-Growth]

5. FarmTogether


farmtogether sign up

  • Minimum Investment to Start: $10,000
  • Type of Investor: Accredited Investors Only

FarmTogether allows real estate investors to invest in farmland. This largely untapped asset class provides cash flow properties with stable returns.

Investors can invest in shares of entities that hold farmland—generally, LLCs managed by FarmTogether. You can receive cash distributions and gains through land appreciation.

The income comes quarterly or annually, depending on the farmland’s harvest schedule and lease agreement with the farmer.

You’d only realize the appreciation value when it came time to sell. This allows you to hold properties for the long-term and realize more favorable capital gains tax treatment.

 

6. Hedge Funds


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Hedge funds are actively managed investment vehicles with managers who employ various investing strategies.

Often, this includes buying assets with borrowed money or margin, short selling stocks or other securities, trading non-liquid assets and taking opposing bets on a position as a hedge on risk.

In exchange for these exotic investment decisions intended to produce returns higher than the stock market, they tend to charge high fees. Such fee models include a percentage of assets under management and profits made during the year.

One famous pricing model is called the “2 and 20 model”, where investors pay 2% of assets under management and 20% of all annual profits.

To overcome these high costs, hedge funds need to produce market-beating returns regularly.

Accredited investors often place money with these risky alternative investments in an attempt to outperform the market or provide better returns than they expect through making their own investment decisions.

Accessing a hedge fund requires a high minimum investment or net worth, often leading to only the wealthiest clients eligible to participate.

Related: Best Commission-Free Stock Trading Apps & Platforms

7. Venture Capital


reviewing investment returns

Venture capital is a form of financing made available through private equity funds and other investment firms to startups or other small companies seen as having long-term growth potential.

Typically, venture capital funds tend to come from well-off investors or private firms but don’t always come as a financial investment.

Some venture capitalists provide managerial or technical expertise instead of financial capital.

When a small firm believes it can grow substantially and quickly with the help of outside capital or expertise, it will consider venture capital as a means to expand rapidly.

Venture investments carry considerable risk compared to a publicly-registered security trading on a regulated exchange in the financial sector.

Venture funds are an investment vehicle that can provide access to several small funds at once. Some platforms allow you to invest in small businesses directly.

Mainvest allows individual investors to invest in Main Street businesses in their area or across the nation. You can choose to invest small amounts to support the business.

 

8. Fine Art


alternative investments art medium

  • Minimum Investment to Start: $1,000 (Masterworks)
  • Type of Investor: All Investors

If you prefer to look at paintings over jewelry, collectible art may be an investment you should consider. When looking into building wealth, not all art investments are created equal.

The art you invest in must come with certificates of authenticity.

Additionally, fine art will most likely increase in value if a well-known artist creates the piece. This applies especially to an artist who has passed away and cannot release new pieces.

Buying famous artwork on your own carries a high price tag and comes fraught with risk for those without knowledge of the industry.

To reduce your costs and risk, you may want to consider using Masterworks or a similar platform.

Masterworks allows you to purchase fractional shares of ownership of famous paintings. For example, you might have partial ownership of a painting done by Claude Monet.

Masterworks’ expert art collectors specifically choose paintings they believe will have the highest appreciation rates and lowest risk.

This is a wonderful option for people who want to invest in art, but don’t know how to find private buyers on their own, don’t have the funds to purchase these costly works of art, or aren’t sure how to store them properly.

The minimum investment to get started through Masterworks is $1,000. It should be noted that this type of asset is illiquid and can’t be sold as quickly as other appreciating assets.

If you’re passionate about art and looking for a long-term investment, you may be able to capitalize on blue-chip paintings appreciating. Sign up to learn more.

 

9. RealtyMogul


realtymogul investment options

  • Minimum Investment to Start: $5,000
  • Type of Real Estate Investment: Commercial and Residential Real Estate
  • Type of Investor: All Investors

RealtyMogul is an online real estate crowdfunding marketplace for real estate investing, namely commercial real estate and private real estate assets. The company caters to individuals seeing institutional quality real estate investments.

The company offers two private REITs for non-accredited investors and private placements (private real estate investments between two or more parties) for accredited investors.

Suppose you wish to participate in private placement opportunities through RealtyMogul. In that case, you can choose to invest through fractional ownership in an individual property or group of properties.

Interested investors who’d like to participate in the real estate investment trust (REIT) opportunities can look at their two options:

  • The Income REIT: Pays monthly dividends at a 6% – 8% annualized rate (net of annual management fee) and focuses on income-generating assets more than growth-oriented investments. This fund invests in commercial real estate investment options like office buildings and retail space and residential real estate investment options like multifamily properties.
  • The Apartment Growth REIT: A more balanced approach between income and growth, this REIT offers the ability to earn passive income at a lower annualized rate than the monthly dividends from The Income REIT, but with an eye toward capital appreciation as well. This fund differs in the holdings held within the portfolio, opting instead to invest solely in residential apartment buildings.

RealtyMogul charges a 1% annual management fee for their Income REIT fund and a 1.25% annual management fee for their Apartment Growth REIT fund.

Learn more about RealtyMogul by visiting their site.

 

10. AcreTrader


acretrader sign up

  • Minimum Investment to Start: $10,000
  • Type of Real Estate Investment: Farmland
  • Type of Investor: Accredited Investors Only

AcreTrader operates a similar crowdfunding real estate investing platform as FarmTogether, focusing on accredited investors with at least $10,000 to invest over three years or more.

The platform has a limited number of new offerings to choose from but has a rigorous underwriting and due diligence process for properties offered on the platform.

You can invest through a Self-Directed IRA (SDIRA) or a taxable brokerage account.

 

11. Fine Wine


wine assets that appreciate in value medium

  • Minimum Investment to Start: $5,000 (Vinovest)
  • Type of Investor: All Investors

You don’t need to be a wine connoisseur to understand why fine wine can be a worthwhile investment. Wine often increases in quality as it ages, making it more valuable.

With rare wines, supply and demand work in your favor. Only a finite amount of wine is produced in specific regions each year, and as people drink that wine, the supply diminishes.

As demand increases for the dwindling supply, the price people are willing to pay for it rises.

Fine wines usually deliver long-term, stable growth. Wine does not correlate strongly with the economy and can hedge against inflation and economic recessions.

The U.K. government considers wine with a lifespan of 50 years or less as a “wasting asset” and therefore doesn’t typically qualify as taxable income.

If the wine counts as a “wasting asset” in the U.S., you shouldn’t need to account for wine as taxable income, which helps with your overall profit margins.

Unfortunately, you can’t simply buy a bargain wine from the grocery store, stick it in your basement for a few years, and expect profits.

If you want to make money from wine, it needs to count as rare, authenticated wines that investors store in optimal conditions.

Unless you already have vast wine knowledge and a professional storage setup, I recommend using Vinovest.

Vinovest ensures wine authenticity, stores it for you and ships it to buyers. Investors need to select an investment style, fund an account with a minimum of $1,000, and patiently watch their account balances grow.

Vinovest charges annual fees of 2.85% (or 2.5% for balances over $50,000).

If you decide to drink some of your rare wine yourself, Vinovest will ship it to you for free.

To learn more about the service, read our Vinovest review.

 

Other Top Investment Opportunities to Consider


Check out some of these other investment options for a complete listing of every FinTech-enabled investment opportunity popping up in 2021.

Related Accredited Investor Questions

What can I invest in as an accredited investor?


evaluating investments

As an accredited investor, you can invest in­ everything a non-accredited investor can buy. Still, you also have access to unregistered securities like those purchased by hedge funds, venture capital firms, angel investors and more.

Many of the assets available to an accredited investor fall under Regulation D Offerings (or “Reg D” for short) under the Securities Act of 1933.

This provides several exemptions from the registration requirements, allowing companies to offer and sell their securities without registering them with the SEC.

As mentioned above, this can mean a variety of private placements and other investments:

  • Asset-backed investments: Investments offered directly to investors secured by a firm’s assets. In the event of default, these investors would have a legal claim to the firm’s assets.
  • Interval funds: While similar to mutual funds in that they pool investors’ money together to purchase a common basket of assets, these professionally managed funds don’t require a daily reporting of net asset value (NAV) and only allow designated periods (or intervals) to transact. The reasoning is that fund managers have more leeway when making investment decisions as they have more certainty they will have capital available to the investment company.
  • Hedge funds: A hedge fund takes investor money and uses it to make non-traditional investments or use exotic investment vehicles to attempt beating the stock market. Qualified investors commit capital to a hedge fund and allow them to use various investment strategies for their money. Typically your income level needs to be elevated, or you need a high net worth to contribute money to a hedge fund.
  • Private equity funds: Private equity funds invest in businesses and do not have this company publicly available to other investors. This differs from stocks that trade on an organized exchange, where millions of investors can buy and sell shares of stock. Private equity is a form of funding available from high net worth individuals and firms.

You can also consider investments like venture capital, angel investing, real estate deals and crowdfunding.

Related: Best Fundrise Alternatives [Accredited & Non-Accredited Apps]

Do accredited investors get higher returns?


investing money decisions

Not necessarily. While accredited investor status requires you to have more financial resources at your disposal, accredited investors do not automatically earn higher returns than non-accredited investors.

Depending on the type of investments available through a private fund or asset class, an accredited investor may earn higher returns stemming from an illiquidity premium.

This means an investor expects to earn higher returns than those available through conventional securities like stocks, mutual funds, or exchange-traded funds because they lose access to their cash until the investment matures.

Related: 8 Best Stock Trading & Investing Apps for Beginners

Is it worth it to become an accredited investor?


man looking at his phone happy

Becoming an accredited investor allows you to invest in more assets than the investing public.

Several companies specifically establish special investment pools catering to accredited investors, as this entails less regulatory burden and hassle with registering securities with the appropriate regulatory authorities.

Becoming an accredited investor can provide you with more opportunities to invest your money. However, being an accredited investor does not necessarily mean having higher returns.

In exchange for forking over your money to non-traditional assets, you should expect that your returns will outperform the market as a whole.

Often, becoming an accredited investor changes little for your investing concerns. You want to preserve your day-to-day lifestyle through asset preservation or grow your funds through wealth accumulation.

Investing as an accredited investor does require you to participate in accredited investor-only deals. Choosing to invest in the real estate market, stocks, or other standard types of assets is prudent.

When deciding whether you should invest in accredited investor opportunities, you should balance the trade-off you make between higher-reward potential with the lack of reporting requirements or regulatory transparency.

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About the Site Author and Blog

In 2018, I was winding down a stint in investor relations and found myself newly equipped with a CPA, added insight on how investors behave in markets, and a load of free time.  My job routinely required extended work hours, complex assignments, and tight deadlines.  Seeking to maintain my momentum, I wanted to chase something ambitious.

I chose to start this financial independence blog as my next step, recognizing both the challenge and opportunity.  I launched the site with encouragement from my wife as a means to lay out our financial independence journey and connect with and help others who share the same goal.

Disclaimer

I have not been compensated by any of the companies listed in this post at the time of this writing.  Any recommendations made by me are my own.  Should you choose to act on them, please see the disclaimer on my About Young and the Invested page.

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