What is an Accredited Investor?

After several years of the hardworking experience, you decided to invest in something valuable. Despite the fact you had a great year and earned a considerable amount of money, you might find out that not all the projects are accessible for you. What takes you apart from the possibilities? The thing is that, around the world, there are government rules that regulate and distinguish accredited and nonaccredited investors from each other, and the United States is not an exemption as well.

An accredited investor does not mean you get a certificate or a government-issued document. It is just a term indicating you are qualified enough to invest in a scaled project. 

How to know if you are an accredited investor?

To get the status of an accredited investor, you must qualify at least one of two conditions:

1. You Must have an annual income that surpasses $200(k) or have $300(k) joint income with your spouse - You must qualify the mentioned requirement for the last two years. At the same time, you must show the ability to earn the same amount or more by the end of the ongoing year.

2. Your net worth must be surpassing $1 million - excluding the costs of your primary residence.

The mentioned rules are valid for individual investors. But what about entities? The entity is qualified as an" accredited investor" if its net worth exceeds $5 million. At the same time, the organization is qualified if each member is an accredited investor individually. 

How regulations defend young/newbie investors from failure?

The division of accredited and nonaccredited investors might seem unfair for many people. But it has a relatively adequate explanation. First, not all projects require certified investors. Contrary, the majority of them are free from these restrictions. Second, scaled projects are challenging to implement. They need years of experience to fulfill the objectives. Without regulation, newbie individuals or companies might take on too many obligations. The probability of failure is high. Therefore, they should avoid large-scale projects, and restrictions certainly help them stay on a safe side.

Conclusion

To sum up, being an accredited investor is an advantageous act. It helps large projects to be correctly done and helps newbies not to risk their money and don't destroy everything they accumulated for several years.