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How To Become an Accredited Investor: A Step-by-Step Guide


Becoming an accredited investor opens up a world of investment opportunities that are typically inaccessible to the average, non-accredited investors. These opportunities include venture capital funds, private equity funds, hedge funds, and other unregistered investments.

But what does it take to achieve accredited investor status? This article is your step-by-step guide on how to become an accredited investor.

Step 1: Understand the Accredited Investor Requirements

An accredited investor is an individual or a business entity that is allowed to trade unregistered securities. According to the Securities and Exchange Commission (SEC), an accredited investor can be a natural person, a financial institution, or a brokerage firm.

For natural persons, the requirements include either:

An annual income of $200,000 (or joint income of $300,000 for a couple) for the last two years, with an expectation of maintaining the same income level in the current year.
A net worth exceeding $1 million, either individually or jointly with a spouse. It’s crucial to note that this amount excludes the value of your primary residence.

For financial institutions and businesses, the requirements vary, but they generally involve assets exceeding $5 million.

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Step 2: Thorough Examination of Your Financial Statements and Tax Returns

To begin the process of becoming an accredited investor, a thorough review of your financial health is indispensable. Your financial statements and tax returns form the foundation for validating your accreditation status.

When it comes to meeting the income-based accreditation requirements, an examination of your past two years’ income history is necessary. You need to provide tax returns from the previous two years, which display an annual income of $200,000 for an individual, or a joint income of $300,000 for a couple. It’s also essential to demonstrate an expectation of the same income level or higher in the current year.

For the net worth-based requirement, a comprehensive review of your financial statements becomes necessary. You’ll need to account for all your assets, excluding the value of your primary residence. The net worth of an individual or a couple jointly should exceed $1 million. This examination will include all your assets – from real estate investments (excluding your primary residence) to investment portfolios.

Step 3: Gaining a Clear Understanding of Investment Options Available for Accredited Investors

Accredited investor status offers access to a broader, more diverse range of investment vehicles. These are not typically available to non-accredited investors. This array of opportunities includes various private funds, such as hedge funds, venture capital funds, and private equity funds.

These funds are considered alternative investments, diversifying beyond traditional mutual funds. They can provide a degree of portfolio diversification that’s designed to potentially yield higher returns compared to traditional investments.

Hedge funds are investment pools that use varied strategies to earn active returns for their investors.

Venture capital funds invest in start-up companies and small businesses that are believed to have long-term growth potential.

Private equity funds invest directly in private companies or conduct buyouts of public companies, resulting in a delisting of public equity.

Understanding the pros and cons of these complex investment opportunities is essential. These investment vehicles often involve higher risks and are less liquid than traditional investments, but they may also yield significantly higher returns.

Therefore, a clear understanding of these investment types, their operation, and their potential impacts on your overall investment portfolio is crucial for any prospective accredited investor.

Step 4: Engage Professional Investment Advisors or Advisers

Navigating the complex landscape of being an accredited investor can be a challenging task. This is where professional investment advisers or investment advisors come into the picture. With their deep understanding of financial markets, they can provide guidance and insights to help you make informed decisions.

An investment advisor can shed light on the nuances of the minimum investment amounts required by different investment vehicles, such as hedge funds and private equity funds. They can also guide you on how to diversify your investments across these platforms to balance risk and reward.

These professionals can further assist you in understanding the risk factors associated with each type of investment. They analyze market trends and regulatory changes, advise you on the potential opportunities and threats, and help you craft a comprehensive investment strategy tailored to your financial goals.

Additionally, investment advisors can guide you through the process of meeting accredited investor requirements, verification, and maintaining your status over time. This guidance can prove invaluable, especially for those new to the realm of accredited investing.

Step 5: Verification Process by a Third Party or an Executive Officer

After understanding the requirements and preparing your financial documentation, the next step is the verification of your accredited investor status. This can be executed by a certified third party, such as a certified public accountant, a registered investment advisor, or a licensed attorney.

These professionals can verify the accuracy of your financial documents and affirm that you meet the SEC’s criteria.

On the other hand, if you’re investing in a company where you’re an executive officer, the company can verify your status. As an executive officer, you likely have sufficient knowledge of the company’s financial condition, so you can self-verify your accreditation status.

This verification process ensures that you meet all the necessary criteria to become an accredited investor, paving the way for you to take advantage of the unique investment opportunities reserved for accredited investors.

Step 6: Dive Into the Investment World

Having established and verified your accredited investor status, you’re now ready to delve into the investment world. It’s essential to remember that minimum investments for these unique investment vehicles are often high compared to traditional investments.

For instance, many hedge funds have minimum investment requirements of $1 million or more. Private equity funds and venture capital funds may also require significant initial investments. These funds are intended for investors who have a substantial amount of investable capital and can withstand the potential for substantial losses.

Therefore, before you take the leap, ensure that you understand the investment terms, risks, and potential returns. Assess how these investments align with your financial goals and risk tolerance. You might consider diversifying your investments across various funds to balance the risk.

Moreover, stay updated with the latest investment trends and market dynamics. The world of accredited investing is continually evolving, and new opportunities are always emerging.

By staying informed, you can make the most of your accredited investor status and find the best investment opportunities for you.

Accredited Investors Investment Opportunities

There are a plethora of unique investment opportunities available exclusively to accredited investors. Some of these include (for a full list of Investment Opportunities click here)


Fundrise is a groundbreaking investment platform that enables individuals to invest in commercial real estate, a privilege formerly reserved for institutional investors. This democratization of real estate investing has made Fundrise a popular choice among accredited investors looking to diversify their portfolios.

Fundrise operates on the premise of “crowdfunding” for real estate, pooling together funds from many investors to purchase commercial real estate properties. Notably, Fundrise is available not only to accredited investors but also to non-accredited investors.

With a low minimum investment of just $500 for their starter portfolio, Fundrise is an attractive option for those new to real estate investing. Despite its accessibility, Fundrise does not compromise on the quality of its offerings.

It provides a range of investment options, including eREITs and eFunds, which allow investors to invest in portfolios of real estate assets like apartments, hotels, and office buildings.

Investing with Fundrise has the potential for both regular income and capital appreciation. Investors receive dividends from the rental income generated by the properties in the portfolio, and there’s also the potential for asset value growth over time.

That said, as with any investment, there are risks involved, including market fluctuations and a certain level of illiquidity.

Click here to learn more about Fundrise and whether it aligns with your investment goals.
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Streitwise offers an intriguing opportunity for investors who are looking to capitalize on the expertise of a team that concentrates their investments within a specific geographic area. This focus allows them to leverage their in-depth knowledge of the locale to generate high quarterly dividends. Over the past four to five years, their strategy has resulted in an impressive annualized return of nearly 10%.

Open to both accredited and non-accredited investors, Streitwise sets its account minimum at $5,000. It charges a 2% annual fee, which is somewhat higher compared to other similar offerings. Nonetheless, the company’s performance and a solid loan-to-value ratio of 0.5 indicate a well-run operation with appropriate leverage.

Streitwise’s REITs represent a valuable investment opportunity, especially considering their record of delivering robust returns. For more details about Streitwise and its REIT, click here.
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Yieldstreet provides a unique investment platform where not only real estate but other alternative investments, including art, are available. This platform allows for diversified investments across different asset classes, making it an attractive option for many investors. With a minimum investment of $10,000, you can explore a wide array of investment opportunities.

Yieldstreet stands out for its high level of transparency. Detailed information about each investment, along with the expected annual return, is provided upfront. This helps investors understand investment objectives and annual management fees before making any commitments.

However, it’s important to note that Yieldstreet’s fee structure can be a bit complex, with fees ranging from 0% to 2% per year depending on the specific investment. As with any investment, conducting due diligence is crucial, especially considering the potential risk involved with certain assets.

To learn more about Yieldstreet and its diverse offerings, click here.
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Masterworks is an innovative platform that democratizes the world of fine art investing, a domain traditionally reserved for the ultra-wealthy or specialized investment funds. By purchasing artwork from renowned artists and issuing shares in these pieces, Masterworks enables both accredited and non-accredited investors to gain exposure to the lucrative art market without having to buy an entire artwork.

Masterworks requires a minimum investment of $1,000, but it’s essential to understand the distinct nature of art investments. The value of art can be subjective and heavily influenced by market trends and tastes. However, if a piece of art appreciates, the returns can be quite substantial.

Masterworks focuses on acquiring works by blue-chip artists with a history of appreciation. Detailed research and analysis are provided for each artwork, assisting investors in making informed decisions. However, investing in art is not for those seeking quick returns. It often requires a long-term investment horizon due to the illiquid nature of the art market.

For investors seeking portfolio diversification beyond traditional asset classes, Masterworks offers an exciting opportunity. If you’re interested in learning more about Masterworks and its offerings, click here.
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Step 7: Stay Informed and Maintain Your Accredited Investor Status

Just as essential as becoming an accredited investor is maintaining your status. Regularly review your financial standing and continue filing accurate tax returns. This diligence is important as your accredited investor status is contingent on your income or net worth meeting the required thresholds.

Stay updated with the latest SEC regulations regarding accredited investors. These rules can change, and it’s essential to ensure you’re continually in compliance. If your income or net worth falls below the required thresholds, you risk losing your accredited investor status.

Also, engage in regular discussions with your investment advisors to keep abreast of changes in the investment landscape. As the market evolves, new opportunities may arise, and some may become less desirable. Regular updates will allow you to adjust your investment strategy accordingly.

Final Thoughts: Unlocking Investment Potential

Becoming an accredited investor is a significant step forward in your investment journey. It not only allows you to access unique investment opportunities typically reserved for high-net-worth individuals and institutional investors, but it also presents a chance to diversify your investment portfolio and potentially yield higher returns.

Remember, the journey to becoming an accredited investor involves understanding the requirements, preparing your financial documentation, and getting verified by a reliable third party. But the journey doesn’t end there; staying informed, maintaining your status, and constantly seeking new opportunities is equally important.

With this status, you become a key player in the financial market, supporting companies, start-ups, and funds that can potentially shape the economic landscape. This is a responsibility and an opportunity that can be both exciting and rewarding. Welcome to the world of accredited investing.

The post How To Become an Accredited Investor: A Step-by-Step Guide appeared first on Modest Money.

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