Blog Investing Accredited vs non-accredited: Limits for US investors

Accredited vs non-accredited: Limits for US investors

date November 13, 2020 time 4 min read

From long-standing options like foreign stock ETFs to new kids on the block like crowdfunding and peer-to-peer lending, there’s no end of platforms open to non-accredited investors. Here are a couple opportunities we think you should check out if you’re a non accredited investor.

Are you aware of your limitations as an investor?

There are two major categories of investors in the US. Accredited investors and non-accredited investors. 

Which one you are determines which investments are legally available to you. We’re going to break these categories down for you to help you understand what you can invest in today.

As a non-accredited investor, it's easy to feel like your money is pinned down by regulations.
As a non-accredited investor, it’s easy to feel like your money is pinned down by regulations.

Accredited‌ ‌vs‌ ‌non‌ ‌accredited‌ ‌investor‌: What’s the difference?

The concept of accredited vs non-accredited investor was originally introduced to protect novice investors from facing financial ruin. 

The split emerged in 1933 in response to the economic impact of the Great Depression. At this time, the stock market crashed horribly.

The Securities Act of 1933 introduced the distinction to keep novice investors out of investments that require knowledge and experience to properly evaluate. These include corporate loans, private equity, and most direct foreign investment. Many of them are some of the most profitable investments available.

So what do you have to do to be an accredited investor?

Accredited investor definition

Accredited investors are allowed to trade securities even if they are not registered with financial authorities. 

What does that mean?

Investing in a non-registered company puts you at higher risk because these companies don’t need to go through the same financial background checks. Accredited investors can become victims of unregistered securities scams that are disguised as “private offerings.”

Some companies choose not to register securities with the Securities and Exchange Commission (SEC) to save money. Any time a trading action is made the SEC automatically charges a regulatory fee. Companies must also face strict background checks and legal expenditures to receive SEC registration.

For many small businesses, it’s just not worth it.

To become an accredited investor, you traditionally must satisfy at least one requirement below regarding net worth, income, asset size, government status, or professional experience.

  • You must prove you have earned at least $200,000 for the past two years (if married $300,000)
  • Possess at least $1 million in assets (not including primary residence)

Non-accredited investors can invest in many more things today

Recently, the SEC introduced new criteria that allow non-accredited investors to become accredited investors. You can join the ranks of these chosen few if you can prove sufficient knowledge and experience of the market, even if you do not meet the income requirements. 

For example, individuals in possession of SEC designated certifications such as the Licenced General Securities Representative (Series 7) can qualify for accredited investor status. Or if, for example, you work for a brokerage service.

Non-accredited investors are people who do not meet the legal financial requirements set by the SEC for unregulated investing
Non-accredited investors are people who do not meet the legal financial requirements set by the SEC for unregulated investing (source: flickr.com)

Accredited‌ ‌vs‌ ‌non‌ ‌accredited‌ ‌investor‌: Investment Opportunities

Accredited investors have access to more investment options. Plain and simple. 

Because many of their options are unregistered they typically require more research and understanding of the market, as well as more money.

Investment opportunities for accredited investors

  • Hedge funds i.e. professionally managed funds such as mutual funds that are less regulated. They usually have a steep entry price and high fees.
  • Crowdfunding (real estate & equity). Venture capital firms and individuals can invest in start-ups or commercial real estate in exchange for partial ownership.
  • Foreign securities like bonds. Accredited investment opportunities include international bonds from both international private companies and foreign governments.
  • IPOs (initial public offering) is the first time a company goes public and issues stock. IPOs tend to be exclusively available to accredited investors.
Crowdfunding can be a great investment for accredited investors
Crowdfunding can be a great investment for accredited investors (source: pxfuel.com)

Can non-accredited investors invest?

Yes! You don’t have to be an accredited investor to get access to excellent investment options. 

Non-accredited investors can still invest in many things including:

  • Stocks
  • Real estate
  • Alternative assets
  • ETFs. Funds traded  that track options only available to accredited investors like foreign bonds/economies
  • And even personal loans through the growing P2P lending industry

How much can a non-accredited investor invest?

As a non-accredited investor, there are SEC regulations on how much you can invest in certain ventures.

For example, regulation crowdfunding allows companies to offer and sell securities via crowdfunding. A non-accredited investor can only invest a maximum of 10% of their annual income or 10% of their net worth (whichever is greater) per deal. However, it is usually up to the entity that offers the securities to ensure how much you can put in is within the limit.

When it comes to new investment options like cryptocurrency, however, there are fewer regulations on how much a non-accredited investor can invest.

There are also a growing number of new assets in the personal loans category open to non-accredited investors paying out great returns at low risk.

Here’s one of them…

Cimb the investment ladder by diversifying your portfolio
Climb the investment ladder by diversifying your portfolio (source: needpix.com)

Diversify your investment portfolio as a non-accredited investor with MyConstant

You don’t have to be an accredited investor to access the impressive interest rates available on MyConstant

We offer crypto-backed loans to investors, you lend your USD or crypto to borrowers across the world for a return of up to 7% APR.

You choose the term, we match you with a borrower, and you keep the interest. It really is that simple. All borrower loans are backed over 100% by collateral so you don’t need to worry about defaults.

We’re a user-friendly platform and we offer 24/7 support for our customers, no fees, and a secondary market if you want to back out of your investment early.

Remember: Every accredited investor had to start somewhere.
Sign up for a free account with MyConstant today and start climbing the investment ladder.


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