What are Accredited Investors? | Accredited Investors Explained
In this short video, Titan's Emily Bice explains accredited investors and the qualifications needed to become one. Watch to learn more.
An accredited investor is an individual or business entity that is allowed to trade securities that may not be registered with financial authorities. Accredited investors are entitled to this privileged access if they satisfy certain requirements. In order to qualify, one must either have income exceeding $200,000 in each of the two most recent tax years, or be a person with a net worth exceeding $1 million.
The definition of accredited investor is currently under government scrutiny. Due to the nature of the requirements every day investors are being blocked from investments that are not regulated by the SEC but are very lucrative. These include venture, private equity and certain real estate investments.
Although these alternative investments represent a potentially riskier asset class, these vehicles can offer their investors consistently outsized returns, especially when compared to public stocks or bonds. It's no wonder why some of the most sophisticated investors in the world take advantage of these offerings. The decision to make these risky investments available only to accredited investors was made to protect the less sophisticated investors who may suffer the risk that these securities pose. That said, it's a double edged sword as it ultimately creates an investing ecosystem in which only high net worth individuals are able to participate.
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