An accredited investor has the opportunity to participate in investment opportunities not available to many other investors, and these opportunities offer the hope of higher-than-normal returns. However, with the possibility of greater profit also comes greater financial risk. Below we will go over why it is important to know how to become an accredited investor.
If you meet the criteria that allows you to become an accredited investor, you have no obligation to act as one. However, knowing your options as such an investor and how to become one in the first place is advantageous. If you do qualify or are able to qualify, it may be worth looking into the types of investment opportunities available to you.
Here are some reasons why it is important to know how to become an accredited investor:
- Access to More Investment Opportunities
One of the most obvious and important benefits of knowing how to become an accredited investor and then becoming one is the access you will gain to a larger pool of investment opportunities.
Here are some examples of the investment opportunities available to accredited investors:
- Real Estate Crowdfunding
- Commercial Real Estate
- Hedge Funds
- Angel Investing/Venture Capital
- Real Estate Syndications
- Farmland Crowdfunding
- More Diversified Investing Possible
With more investment possibilities, accredited investors are able to achieve greater portfolio diversification. For example, some accredited investors may choose to invest in real estate crowdfunding, which, although carrying some risk, can offset the volatility of other investments in the same portfolio. - Potential for Higher Returns
Due to the riskier nature of some of the investments available to accredited investors, they also hold the possibility of providing higher returns. At the same time, they have the potential for bearing greater loss. Therefore, investors must be able to handle the risk of sustaining such a loss, which is why these investments are restricted to those with accredited investor status.
Because these investment opportunities open to accredited investors are not regulated by the SEC as other investments are, it is incumbent upon the investor to conduct proper research into these securities offerings before investing.
As you can see, knowing how to become an accredited investor has its advantages. Proceed with caution and gain knowledge about your investment possibilities before purchasing unregulated securities.
