While most investors are allowed to put their money on assets regulated by the Securities and Exchange Commission (SEC), a few can go beyond this. Owing to their solid financial status or professional certifications, some investors gain premium access to investment opportunities that are not open to others. Such investors are referred to as accredited investors.
This Masterworks article breaks down everything about accredited investors and the domains in which they can invest. One must qualify the eligibility criteria for the SEC to recognize an investor as accredited. These investors usually require lesser protection by regulatory filings since they have a refined understanding of financial and investment instruments.
Another reason behind allowing eligible people to invest in securities not regulated by the SEC is their high net worth. Since such undisclosed investments have a risk of resulting in a potentially huge loss, investors with high-valued assets can weather the damage.
Most Sought-After Investment Opportunities For Accredited Investors
The securities open for accredited investors are not offered to the general public due to the involvement of high financial risk. However, accredited investors can legally purchase and sell off such assets with ease. Below are some of the most popular opportunities for such investors.
1. Convertible Investments
To leverage the potential value appreciation of both bonds and stocks, accredited investors can explore the world of convertible investments. These securities, like shares or bonds, can be converted into stock for a fixed price determined previously. This hybrid investment allows accredited investors to get the best of both equity- and debt-type features.
2. Real Estate Syndication
At times when the value of a property is not within the buying capacity of an individual accredited investor, multiple investors pool funds to buy together. This teaming allows them to afford a high-value real estate property and lay the foundation for future gains. In most cases, a dedicated syndicator is responsible for hunting properties and managing the entire deal while bringing all investors together.
This is one of the most common models to help accredited investors invest in the right place while networking with fellow investors. Real estate syndication opens new doors for investors to explore but also comes with certain risks.
Crowdfunding is a widespread practice by which people tend to raise funds for a particular product or project over online platforms. Investors can finance and pool resources for promising companies against a share. This can also penetrate the real estate domain, where investors can get a share in futuristic properties.
4. Venture Capital
This is one of the most talked-about equity financings where investors gain a share of company ownership against the funds provided to the startup. The investment made is put to expand the business, leading its value to appreciate over time.
As the company grows, the value of the share also increases. This, in turn, allows the accredited investor to enjoy huge profits in the longer run. However, business failure is always risky, making it difficult for the investor to get his money back.
5. Hedge Funds
Similar to mutual funds, hedge funds are looked after by professional career investors but often include lesser regulations. This gives them a free hand to explore complex markets and assets. Since hedge funds are open to applying any investment approach, it also empowers accredited investors to opt for a fund that leverages their choice of strategy.
With this Masterworks article, you would have gotten a fair idea of the pool of investment opportunities open for accredited investors. There is indeed a potential risk involved in such investments, but most accredited investors are positioned to make up for the losses.