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You are here: Home / Finance / What Is an Accredited Investor, Exactly?
What Is an Accredited Investor, Exactly?

What Is an Accredited Investor, Exactly?

August 6, 2022 By Cade Hildreth Leave a Comment

Most Americans are taught very little about financial literacy. Thus, the U.S. economy is one of the largest in the world, but America ranks number 14 among countries with the most financially literate citizens.

To gain wealth in America, you have to understand how to take advantage of wealth-building opportunities. One of the most effective ways to build wealth is through investing. However, there’s a major difference between the U.S. government’s definition of a “regular investor” and an “accredited investor.”

In order to have access to the very best investment opportunities—the ones available to the top 1%—you’ll need to be classified as an accredited investor. So how do you become one?

Learn the definition of an accredited investor and how to become one below.

What Is an Accredited Investor?

Most people were taught to save when they were little. When you received birthday money or a gift from grandparents, parents quickly reminded you of the value of savings.

Saving money is a responsible practice, but it won’t add to your wealth. To do this, you need to learn the art of investing.

Accredited investor status is the holy grail of the investment world. These investors stand out from the pack because they meet one of the following criteria:

1. Earned Income

To be classified as an accredited investor, your earned income must exceed $200,000 per year. If you are married, when combined with a spouse, your income must exceed $300,000 per year.

You must earn this income for a minimum of two full calendar years in order for it to count towards this requirement. The current year is not included in these two full years and your income for the current year should be expected to meet these same minimum requirements.

Accredited Investor

2. Net Worth

Another way to be designated as an accredited investor is through your net worth. Your net worth is equal to your total assets minus your liabilities.

Investors with a minimum net worth of $1 million, either on your own or with a spouse, are considered to be an accredited investor.

It is important to note that a primary residence doesn’t count towards your net worth even if you have equity in your home. This is because your house usually costs you money to live in, instead of making you money. Thus, it is considered to be a liability and not an asset.

An example of an asset could be income-producing real estate or anything else that can be sold for cash, such as stocks, bonds, certificates of deposits, or Bitcoin.

The median U.S. household has a net worth of around $97,000. While this number tends to increase as you age, this means that most Americans are far from being accredited investors.

Why Become an Accredited Investor?

A big part of why the rich tend to get richer and the poor tend to get poorer is that the rich tend to have access to better investment opportunities. The public generally can’t invest in hedge funds, private equity deals, venture capital funds, or other high-return deals because these private placements are limited to accredited investors only.

Unsurprisingly, these opportunities can give investors the chance to make hundreds of thousands (even millions) over a lifetime, so it is unfortunate that access to them is usually limited to the wealthiest individuals.

Most investments must be registered with the U.S. Securities and Exchange Commission (SEC) by a licensed broker before they can be sold to an investor. Accredited investors can bypass this rule.

U.S. SEC Headquarters
U.S. SEC Headquarters in Washington, DC

If you want to increase generational wealth for your family, you’ll need access to investment opportunities that can improve your net worth. The largest opportunities for investment returns lie in high dollar investments.

In order to gain access to these investments, you’ll need to become accredited.

How to Become an Accredited Investor?

Ok, you understand now the importance of being an accredited investor, but how do you actually become one? First, there’s no course or certification you can earn that grants you accredited investor status once your net worth changes.

Second, there’s no federal agency monitoring whether investors are or aren’t accredited before they pursue a deal. Instead, companies selling investment opportunities that require accredited investor status must go through the process of vetting individual investors.

As proof of your financial status, companies will ask you to do one of the following:

1) Self-certify that you are accredited

2) Have your CPA certify you as an accredited investor

Why Does Accredited Investor Status Exist?

In theory, accredited investor rules prevent big companies from taking advantage of people who might not be savvy or able to rebound from a major financial loss. The SEC explains that accredited investor rules are in place to protect you.

However, this is rarely how it plays out in real life.

Instead, accredited investor requirements act to preserve the best investment opportunities for wealthy people, while excluding others from other accessing them. If the SEC really cared about protecting you, then you wouldn’t be able to say…gamble your life savings away in Vegas.

Methods to Become an Accredited Investor

There are two clearly defined ways to upgrade your status from a regular investor to an accredited investor, one related to net worth and one related to income.

1. Increase Your Net Worth

The first way to become an accredited investor is to increase your net worth by building up the value of your current investment portfolio. This means aggregating more money in your savings and retirement accounts.

Many real estate investors also build up their net worth by investing in single-family housing until they have enough collateral to purchase multifamily real estate. This is the approach that I have taken.

Multifamily real estate can easily earn an experienced investor an accredited status. Do your research to see which method of building your net worth works best for your skill-set. You could also start a business or get involved with microlending.

Finally, remember that creativity and grit are highly correlated with wealth building and there has never been a better time in history to create wealth quickly, so don’t get discouraged if you’re in the early stages of growing your net worth.

I started from nothing (actually, from six-figures in student loan debt), so no matter where you are now, I believe you can do it too!

2. Increase Your Income

The second way to become an accredited investor is more challenging for the average person. This way is to increase your annual salary.

Currently, the median annual salary in the U.S. is just over $60,000 per year. Unfortunately, this is a big step down from the $200,000 required to become an accredited investor.

For most people, increasing their net worth through investing is a more realistic way of becoming an accredited investor. However, some people with high paying jobs prefer to utilize this approach.

Remember to think beyond your salary at your job. To supplement your income, you can start a business or invest in someone else’s venture to bring in a bigger paycheck.

You can also marry a person with a high income to qualify via this approach. Just remember that when you’re married, your combined income must exceed a higher figure of $300,000 per year.

(*If you want to read the full federal code on how to become an accredited investor, then the “Electronic Code of Federal Regulations” is available here. It’s definitely long and technical, but interesting!)

Accredited Investor Rules

Most people don’t come from wealthy parents and we definitely aren’t taught ways of becoming an accredited investor in junior high, high school or college. However, there is a path forward that can empower you to take control of your financial health.

The first step is doing your research to learn what you can invest in with the time and money you have today.

Want to stay in the loop? Join nearly two million other readers who are learning how to increase their income, invest in real estate, buy and sell crypto, and so much more.
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“As an LGBTQ+ entrepreneur, real estate investor, former USA Rugby Player, and fitness fanatic, I’ll teach you what your parents and teachers should’ve taught you, but didn’t know themselves.” -Cade Hildreth

Want to know what I learned making my first few million? Subscribe here.

Or, listen to Cade’s articles on the go as a Podcast.

Because it’s the New Year, let’s talk about ch Because it’s the New Year, let’s talk about change...

For a long time, I’ve thought about top surgery. I remember when I was 6 or 7 years old when I wanted to run around outside on a hot, sunny day with my shirt off…and I first saw my parents… hesitate. Ughh. 

It wasn’t their fault but I still remember that heart wrenching feeling. To their credit, they ultimately said, “Ok, go do it!” While I did “do it”, I remember the feeling of shame that crept in.

Over the years, being in affirming sporting/rugby circles helped suppress the urge to get top surgery, but it never quite “stayed down.”

So last summer I got keyhole #topsurgery. I’ll talk about recovery in another post because it was definitely weird to not strength train for months.

But in THIS post, I want to share two things:

1. I am SO grateful to my wife Erin for being the supportive and growth oriented partner that she is. 🥰🙏❤️ 

She is now following her call to get a divinity degree and she’s already working in ministry as a Pastor in Training at an incredible, inclusive Presbyterian church here in Virginia. I am grateful to her for supporting me as I become more and more of who I am—and I’m enjoying watching her do the same! Love you, babe!

2. Second, I’m grateful to get to share who I am with my family. This summer we took a trip to Madden’s resort in MN to celebrate my parent’s 50th wedding anniversary. (It was actually their 52nd, because we had to postpone it twice due to Covid.)

I was nervous to be in the pools and lakes around them, but I could feel it was my only choice because I knew I wanted them to “know me”. And, how could that happen if I “hid me”?

Ultimately, I have to tell you…it was freeing to be me, as I am, who I am. 

I had the BEST time splashing around and biking and goofing around with my wife, niece, nephew, & sister. 🌊🏖🐟

So, I suppose, this is a gratitude post to thank those who have supported me over the years as I become more and more of who I am. 

Top of that list is my wife, Erin, but there are countless others. ❤️

If you’re reading this, thank YOU for being one of those people in my life too. I am deeply grateful. 🥹
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#lgbtqfamily #nonbinary
How to set a boundary? 🤔 . . . . #lgbtqia #lgb How to set a boundary? 🤔 
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#lgbtqia #lgbtqcommunity #emotionalhealth
What do you do if you’re telling a past story ab What do you do if you’re telling a past story about someone who has transitioned? 🤔 Share a 💯 if you agree ➡️🏳️‍⚧️🏳️‍🌈
7 things I got clarity on in 2022: 1. Good and b 7 things I got clarity on in 2022: 

1. Good and bad are labels. All things are experiences. 

2. Maturity is taking full responsibility for oneself. 

3. Having a loving, conscious relationship with myself is a core value. 

4. Emotions do not mean that anything has to be done. 

5. When I am in congruence with what I want, I have it. 

6. I have permission from myself to stop doing anything that doesn’t lead to my peace and empowerment. 

7. Stepping toward emotions and being able to feel them is a superpower. It determines the quality of my life. 

(Are there any above that you’d like me to further explain?)
 
Most importantly, which # above resonates with you? ⬆️

Happy New Year, y’all! 🎊🥳
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#lgbtqcommunity #lgbtqiaplus #lgbtsupport #nonbinary #trans #selfgrowth
Interview with Jenny Nguyen, Founder of the Sports Interview with Jenny Nguyen, Founder of the Sports Bra—The World's 1st Bar to Only Play Women's Sports - shorturl.at/doGHZ

I'm excited to introduce you to today's #podcast guest, Jenny Nguyen, who is a professional chef, elite athlete, and entrepreneur.

I invited Jenny onto the podcast because she has done something extraordinary that is long overdue: She has opened up a sports bar that exclusively plays women's sports!

Despite extensive research, Jenny hasn't found another sports bar worldwide that ONLY plays women’s sports.

Given that it's nearly 2023, this is mind-blowing. As a lifelong athlete, I find her vision compelling and inspiring.

Aptly called the "The Sports Bra", the venue is putting Jenny's culinary skills on display alongside women's sports worldwide.

The Sports Bar has taken its mission a even further by partnering with and elevating other local, women-owned businesses.

Specifically, it:

1. Sources its grass-fed beef from @CarmanRanch, an ranch run by Cory Carman, a third gen rancher out of Wallowa, Oregon).

2. Sources its alcohol from Freeland Spirits, an all-women owned and operated distillery out of NW Portland.

3. Has furniture built by @girlsbuild_org, a non-profit organization headed by @ktmhughes in Portland, OR, that teaches carpentry and construction skills to young girls as a path to empowerment.

Since opening the Sports Bra this April, people have come from ALL over the U.S. and the world to experience it—including many professional female athletes.

To learn more about Jenny as she makes history, features women's sports, and elevates women-run businesses, listen to the episode here:

shorturl.at/doGHZ

Or, you can check out the Sports Bra at:

@thesportsbrapdx
TheSportsBraPDX.com/

Have you heard of the Sports Bra or been out to experience it in person?

#lgbtqiaplus #womenownedbusiness #lgbgtqia #lgbtqcommunity #womenssports #womeninsport
Over this recent holiday stretch, we… - enjoye Over this recent holiday stretch, we… 

- enjoyed some quiet time at home
- got a sauna delivered (but not yet installed)
- decorated for the holidays
- baked a bunch
- visited our favorite farm
- did some sight seeing
- and perhaps, most importantly, survived the cold snap along with our feather friends (who lived in the garage for a few days so we could heat them with a space heater) 🥶🐔

How have the holidays treated you…and did you get hit by the winter storms? ❤️🎁☃️❄️
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