Did you know that there are at least six ways to be considered an accredited investor?
And that achieving this status can accelerate your progress toward financial, time and ultimately life freedom?
Read on to learn more about ways to qualify as an accredited investor and how it benefits those who take advantage of the opportunities available only to this exclusive group.
Why It Matters
Being an accredited investor opens the door to a variety of investment opportunities, including investments like PPR’s Income Fund and Opportunity Fund, that aren’t accessible to the general public. The benefits of accredited status are significant, offering exclusive opportunities that are not available to the non-accredited general public.
To start, let’s explore who qualifies as an accredited investor according to the Securities and Exchange Commission (SEC).
Income and Net Worth Criteria
The SEC establishes a clear framework for identifying accredited investors based on two key parameters: income and net worth. Currently, for an individual to qualify, they must earn an income of over $200,000 (individually) or $300,000 (with spouse or partner) in each of the prior two years, and reasonably expect the same for the current year. Additionally, an individual can also qualify by having a net worth over $1 million, excluding their primary residence (individually or with spouse or partner).
Professional Criteria
Income and net worth aren’t the only way to qualify as an accredited investor. Investment professionals in good standing are considered accredited if they hold the general securities representative license (Series 7), the investment adviser representative license (Series 65), or the private securities offerings representative license (Series 82).
Other professionals may be considered accredited if they adhere to one of the following criteria:
- Directors, executive officers, or general partners (GP) of the company selling the securities
- Any “family client” of a “family office” that qualifies as an accredited investor
- For investments in a private fund, “knowledgeable employees” of the fund
(*Note: entities follow a different set of criteria in order to be able to invest into a private placement, and you can find out more about this on the SEC website.)
Investment Opportunities
Achieving accredited investor status opens doors to a world of investments usually inaccessible to the average individual. These often-exclusive investment vehicles can potentially yield higher returns and unique tax benefits.
Such investment opportunities include:
- Hedge Funds: Pooled investment funds that often employ diverse, sophisticated trading strategies, aiming to generate higher returns than traditional investments.
- Private Equity: Investments in companies or assets not publicly traded on stock exchanges.
- Venture Capital: Investments in early-stage, high-growth companies, carrying higher risk but offering the potential for significant returns.
- Angel Investor Networks: Groups of accredited investors who pool their funds and expertise to invest in promising startups.
- Real Estate Syndications: Investors pool capital to purchase and manage large-scale real estate projects, such as apartment complexes or commercial properties, with the potential for attractive cash flow and appreciation (and depreciation).
These exclusive investments, while sometimes carrying a higher risk profile, have the potential for more substantial returns. It is with these high returns compared to more traditional investment options like stocks that investors benefit from accreditation status.
Tax Advantages
Of special note is the fact that certain accredited investments, especially in real estate, may offer tax advantages including depreciation that can reduce one’s overall tax liability. Accredited investors can leverage these tax incentives to enhance returns and manage tax exposure efficiently. PPR’s Opportunity Fund, for example, offers significant depreciation benefits to its accredited investors.
Diversification
Having access to these higher-yield investment opportunities, investors can also create a more diversified portfolio. By diversifying with alternative assets like real estate funds, investors can mitigate risk and reduce overall dependence on a singular asset or certain sectors in the market. Experienced investors understand that diversification is an important part of portfolio construction and know that it’s best practice to avoid having all of your investments managed by one firm, in one fund, or even one asset class. Investing in alternative investments such as private equity and real estate funds allows for exposure to different asset classes and markets, spreading an investor’s risk across multiple risk/return profiles.
Networking
Apart from the direct financial benefits they receive through having access to these investments, accredited investors often have the opportunity to network with other high-net-worth individuals and industry professionals, which can lead to strategic partnerships, knowledge sharing, and new business ventures. While being exposed to educational opportunities, being part of exclusive investment groups or forums can also open doors to more valuable opportunities.
Ultra-high net worth groups exist such as Tiger 21 (where members need to meet multimillion dollar liquid asset requirements to join) that offer both virtual and in-person events but there’s also ones that are more inclusive such as PassivePockets – a new online platform, from the creators of BiggerPockets and Left Field Investors. This platform is designed for accredited investors looking for an online community as well as podcasts, educational resources, and webinars. The site also features comprehensive sponsor and deal directories with user reviews for those looking to vet passive investments. Whether you prefer to network locally or with national groups like these, associations with other accredited investors can be rewarding and fruitful.
Summary
To sum up, accredited investors gain access to a wider range of investment opportunities – often with the potential for higher returns. It’s access to these investments that should drive anyone interested in building a diversified portfolio to become accredited sooner rather than later.
Furthermore, not only are accredited investors benefiting themself, but their investments can contribute to job creation, technological advancements, and economic development in all types of industries. This impact-driven investing allows individuals to align their financial goals with their personal and social values.
If you have any questions or want to learn about the investment options PPR currently has available to accredited investors, please schedule an appointment with our Investor Relations team at the link below.
