So, what’s an accredited investor anyway? Are you one? Does it matter?
As to the first question, it’s pretty simple. An accredited investor is someone who has
- Net worth of at least $1,000,000 (not including their home) OR
- Had an annual income of at least $200,000 for the last two years (or $300,000 in household income), and expects to make at least that much in the coming year. Net worth is just the total value of everything you own, minus any debts you owe (again, not including your home).
Accredited investors can take part in investment opportunities that are inaccessible to unaccredited investors.
Yep, that’s right. If you are “rich”, you are also deemed “capable” of making certain types of investments. Mind you, Johnny could’ve inherited grandma’s multi-million dollar estate overnight and he would suddenly be qualified to play in a whole new ballgame. The day before, he didn’t even have a home budget.
Speaking of ballgames, you might also be thinking of the pro athlete who has spent his young life training on the field. Next thing you know, his deep pockets have him wearing a new jersey that puts him on an unfamiliar team with an exclusive, well-heeled investor status. Meanwhile, the long-time CFO who’s been managing millions for the SMB down the street has to continue playing little league ball.
Well ok, so investing is not a game, and allegedly good intentions spurned the genesis of this new investor designation. Ultimately it’s not all about financial savvy. It’s also about the ability to bear loss.
The original thinking went like this: Someone with a high net worth is 1) more likely to know the basics of how to evaluate certain types of investments and/or 2) they have a sufficient amount of resources to absorb losses should an investment go south.
Now all that said, if you are not an accredited investor, I have some good news. Through Vicinity, you can now play in a world previously inaccessible to the vast majority of the population. No longer are you limited only to traditional investment avenues such as the stock market. You can now redirect some of your investment and savings dollars closer to home.
Of course this is good news for the accredited investor as well. He is not locked out of these investments. Since we all share the same geography, we think it’s a great idea to keep the playing field level around here.