The most obvious benefit of meeting the accredited investor requirements is gaining access to brand new investment opportunities. This investor status rewards you for achieving a certain financial position or other qualifying standards.
Some of the most important benefits of becoming an accredited investor include, but are not limited to:
1. More Diversified Portfolio
With accredited investor status, new, lucrative investment opportunities become available. These may include everything from real estate crowdfunding to hedge funds.
2. Higher Rates of Return
These new opportunities generally bring with them the potential for higher rates of return on your investment. This can enable you to increase your wealth faster than you would otherwise through stocks, bonds, and other standard investments.
3. More Deals available for Investment
Meeting the accredited investor requirements gives investors the ability to invest in deals that are not registered with the SEC.
Having mentioned some of the most significant benefits of becoming an accredited investor, it is now time to take a look at some of the drawbacks of achieving accredited investor status. By knowing the disadvantages of qualifying as an accredited investor, you can prepare in advance for the challenges ahead.
1. High Minimum Investments
Instead of investments in the hundreds or thousands of dollars, accredited investor opportunities often involve investments in the tens and hundreds of thousands of dollars range.
2. Riskier Investments
The higher rewards promised by investments open to accredited investors also tend to come with higher risks.
3. Higher Performance and Management Fees
Opportunities open to those who have met the accredited investor requirements also generally come with higher management and performance fees that can range anywhere from 15 to 20 percent.
4. Tied Up Capital
Accredited investors make larger investments than many other opportunities require. When the investment starts to perform well, accessing your capital is not as easy as cashing out on the increased price of a stock.
After reviewing these pros and cons, you may consider further whether becoming an accredited investor or operating as one is something you want to do.