Whether you are new to investing or have been involved in making investments for years, the term Accredited Investor might be unfamiliar to you.
In the United States, the term Accredited Investor is used by the Securities and Exchange Commission (SEC) to refer to individuals whose annual income or net worth (or a combination of both) is sufficient to meet Congress’s benchmark for “financial sophistication.”
The SEC believes individuals or married couples who meet the Accredited Investor wealth and income level know how to make responsible decisions with their money and have a reduced need for the protection provided by regulatory disclosure filings.
The status of an Accredited Investor has remained limited to people with tangible wealth because it is believed investors at that wealth and income level know how to make responsible decisions with their money.
The SEC allows Accredited Investors to make investments that may not be registered with financial authorities, including venture capital, hedge funds, angel investments, and deals involving complex and higher-risk investments and instruments — investments that pose a larger risk despite their potential to yield great returns.
Take a brief 3 question quiz to determine if you qualify as an accredited investor, and learn more about what that means.