5 Tips for Accredited Investors to Grow Their Wealth

In investing circles, accredited investors are a special breed. They are high-net-worth individuals or entities with the means, and typically the experience, to participate in a variety of investment opportunities, such as those in alternative assets offered by Yieldstreet. Here are five tips that may help accredited investors grow their wealth.

Who are Accredited Investors?

These are people or entities who are permitted to participate in investments that aren’t registered with the U.S. Securities and Exchange Commission, which regulates the securities markets and protects investors.

Specifically, an accredited investor must make more than $200,000 (or $300,000 together with a spouse) annually in each of the previous two years and expects the same earnings for the current year. Also eligible for accredited investor designation are those whose net worth exceeds $1 million, either by themselves or with a spouse, excluding the primary residence’s value. 

A private fund’s “knowledgeable employees” may also qualify, as may financial professionals who have certain financial securities licenses. It’s important to note, verifying an individual is accredited falls upon the investment vehicle rather than upon the investor.

Further, the House recently passed legislation crafted to broaden accredited investor criteria. Under the measure, people with “professional knowledge,” such as brokers or investment providers, may also participate in accredited investing.

Tips for Accredited Investors

Here are some top moves an accredited investor can make to increase their wealth while avoiding making some of the most common investing mistakes:

  1. Begin modestly. Before partaking in a private-placement offering, exercise restraint. Though you likely have the wherewithal to take immediate risks, you first should have ample experience with “regular” savings and investment opportunities. They can help you learn investment due diligence as well as about the industries in which you’re interested.   
  2. Learn how private offerings work. While crowdfunding is not exclusively for accredited investors, participating in them can help you learn on your own, and at your own pace, how private offerings work and are packaged.
  3. Don’t broadcast your status. There’s no need to announce your accredited investor designation. For one thing, every offer is different and will have their own vetting process in place. Broadcasting your status could set you up for pitches in which you’re either not interested, are scams, or that make unrealistic claims.
  4. Understand the costs involved. Higher fees are usually associated with private investments, the possibility of higher returns notwithstanding. There may also be lockup periods and limited liquidity. Most of these are long-term investments to which investors must commit. 
  5. Do your homework. With all that investment freedom comes the responsibility for thorough due diligence. This means reviewing offer documents, the private placement memo, and other application paperwork. Make certain the broker or salesperson is reputable. 

Yes, you’re already an accredited investor, but you want to take advantage of your status and continue to add to your wealth. Adding these tips to your investing playbook may serve you well in that regard.

Source: Yieldstreet


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