Becoming an accredited investor has its perks. Certain investment opportunities are only available to them. With the benefits also come the responsibilities that an accredited investor must fulfill.
You must be wondering now who is an accredited investor and how to become one. There are criteria set by the financial regulatory body of any state that must be fulfilled to be allowed to participate in investment opportunities as an accredited investor.
You can learn the skills and fulfill the criteria of becoming accredited investors with the help of experts at Legacy Exploration. With more than 50 years of experience in the industry, they can provide you with the right quality of information that you will need in your journey of becoming and flourishing as an investor in the sector of oil and gas. When you team up with reliable partners like these, your probability of success increases many folds.
What is an accredited investor?
A general investor can invest only in securities that are registered with SEC (Securities and Exchange Commission). On the other hand, when you become an accredited investor, you can invest in other securities including venture capital and crowdfunding as well. This increases your chances of getting higher returns than many others in the field.
However, you must fulfill certain set criteria to become accredited. Some of these criteria are:
- Your income for the last 2 years as an investor should be $200,000 or more.
- You have a net worth of $1,000,000 either alone or jointly with your spouse excluding your primary home.
- As a company, your combined asset value should be more than $5 million or all owners should individually be investors who are accredited.
- An individual to meet the criteria of being accredited should have credentials showcasing his financial knowledge.
Meeting these requirements ensures that you can bear additional financial risks when you are trading in unsecured investment fields.
Perks of being an accredited investor
- You get access to a wider range of investment opportunities.
- You can invest in crowdfunding, hedge funds, commercial real estate, venture capitals, and real estate syndications.
- More opportunities, higher the risk, but also higher earning potential.
- Diversification of a portfolio becomes easier when you become accredited, reducing the risk of losses.
Drawbacks of being an accredited investor
Every opportunity has some associated risks and drawbacks. Some of the cons of becoming accredited are:
- Access to the investment opportunities is available only if you agree to fund a minimum amount which is much higher than regular registered investments.
- You will also be paying a higher performance fee and your capital will be locked for a much longer time.
- You will have to investigate and research all the new investments because they do not fall under SEC protection rules. Therefore, more diligence is required while investing.
- You will have to face higher financial risks.
- You will need an attorney to review all financial documents before signing new deals.
An accredited investor needs to spend more time doing their homework. Though the returns are high, the risks are equally large. If you want to function on the safer side, do not apply for accreditation.
Whether accredited or not, always chose your investments smartly and rationally within your risk tolerance limit.