Accredited vs. Non-accredited Investor

Accredited vs. Non-Accredited Investors — And the Best Ways to Invest for Both Types

Accredited investing is elite stuff — it’s something that will never be relevant for the vast majority of people. But if you have a sufficiently high salary or net worth to make the cut, it’s well worth investigating if it could make sense for your goals. You won’t just get a cool title — you’ll also have the door opened to investment opportunities that most people can’t access. But how does being an accredited vs. non-accredited investor compare?

To answer that question, we’ll investigate what accredited vs. non-accredited investors are, how to become one, the pros and cons of both investor statuses, and the best investment options available to them. Whatever you ultimately decide, at least you’ll go into it assured that you know what you’re doing.

What are accredited investors?

Accredited investors have a freedom that “standard” investors lack in the US : the option of investing in securities that aren’t registered with the financial authorities and haven’t undergone the same background checks. For instance, early-stage startups often don’t register with the Securities and Exchange Commission (SEC) to avoid legal and regulatory fees. As a result, your Average Joe will never get the chance to invest in the next Facebook before it goes public.

We have this system because non-regulated assets carry the most risk — scams are prevalent — and could destroy our finances. It makes sense they’re not available for just anyone. However, those with enough assets and/or knowledge are deemed to be advanced traders who can afford to take the risks involved and make educated decisions.

The accredited vs non-accredited investor distinction hasn’t always been around — it came into play with the Securities Act of 1933, which the US government introduced as a response to the Great Depression. Authorities recognized that the stock market collapse had a strong negative impact on household finances, which could be limited with greater regulation and limitations on who can invest in what.

So, is it looking after the little guy or preventing him from becoming the big guy? Maybe a bit of both.


To be granted the privilege of accreditation, investors must have one of the following:

  1. Earnings of at least $200,000 over the past two years (or a joint income of $300,000 for married couples).
  2. A net worth of at least $1 million.
  3. A General Securities Representative license, Private Securities Offering Representative license, or Investment Adviser Representative license.

The first two criteria come down purely to your wealth, whereas the third criteria is a relatively new addition that allows knowledgeable individuals who don’t meet the income requirements to become accredited investors. However, for this to work, you’ll need specific certifications from the SEC, which are usually reserved for those who work in the industry.

Also, bear in mind that the property you live in doesn’t count towards your net worth (and likewise, a mortgage on your primary residence also doesn’t count as a liability). There are some other details you can check on the SEC Investor website.

Accredited vs. non-accredited: Which should you choose?

The main advantage of being an accredited investor is access to a wider variety of investment opportunities. While anybody can invest in assets like stocks, index funds, and even newer alternative investments like cryptocurrencies, you’ll still be somewhat limited. Only accredited investors can access foreign direct investment (like international bonds), IPOs from companies, hedge or capital funds, and some real estate project investments.

Even for opportunities available to all investors, non-accredited investors may face some limitations. For instance, crowdfunding regulation says that non-accredited investors can only invest 10% of their net worth or annual income in a deal.

These can also be some of the most profitable investment opportunities. Although you can get rich from buying stocks, you can get richer by investing in a company before its stocks even become available to the public — and this isn’t something the average person gets the chance to do.

Pros of remaining non-accredited

But even if you’re eligible to be an accredited investor, you might decide that it’s not the right path for you. 

The accredited-only opportunities tend to carry a lot of risk, which is why they were limited to accredited investors in the first place. Although they might be more profitable, you can also make good returns elsewhere while taking on less risk. It’s a matter of your personal priorities.

Besides, the number of innovative new methods for growing money increase each day. For instance, alternative investments like peer-to-peer lending have made it possible for anyone to invest in ways that weren’t possible before, and cryptocurrencies have also opened a whole new world.

Not everyone is sufficiently interested in the investment opportunities reserved for accredited investors — you might be happy to stick to classic choices like stocks. In that case, it’s probably not worth the bother of verifying your eligibility. The process can be somewhat arduous — we’ll get to that now. 

How to become an accredited investor

If you’d like to go down the accredited route, you’re no doubt eager to know exactly what it takes to get there. Since the whole point of being accredited is that the SEC is no longer involved, each firm has its own process for verifying that investors in place of a universal system.

Usually, you’ll need to fill in a form with all your personal details and provide certain documents.

Accredited investor verification

Depending on your route to being an accredited investor, companies might ask for any of the following documents:

  • Credit report (for information about your net worth)
  • Financial statements of your investments 
  • Tax return or form (you’ll usually need to show them for the past three years)
  • Relevant professional certifications from the Financial Industry Regulatory Authority (FINRA) 

Unfortunately, you’ll have to provide these every time you sign up to invest on a new platform as there’s no universal document of your accredited status you can use each time.

Accredited investors: Best ways to invest

We’ve already touched on the types of investments available to accredited investors, but now it’s time to get more specific. What are the very best opportunities available?

Hedge funds

Hedge funds are only available to accredited investors because they often use techniques like leverage and short-selling, which rely on debt and therefore carry more risk than standard funds. This can result in greater returns, but  it comes at a cost.

Another difference between hedge funds and more traditional funds is that only hedge funds can include investments like currencies, real estate, and art. 

To start investing in a fund, you’ll need to contact it to find out if it’s currently accepting investors. This process is harder than it sounds — accreditation only isn’t a guarantee of acceptance — so it’s usually done with the help of financial advisors (unless you have some very good contacts).

Real estate

Real estate is another viable option for accredited investors. Although anyone can buy a property (provided they have a down payment and meet other requirements), non-accredited investors can’t invest in commercial or private projects. 

RealtyMogul, Crowdstreet, and Fundrise are two great options for investing in this type of project. They’re all crowdfunding platforms, but there are some differences. 

RealtyMogul mostly offers real estate investment trusts (REITs), which let you invest in various real estate projects at once, and private placement funds (like IPOs but only for a select group of investors). Fundrise has a mix of commercial and residential projects, and it offers eREITs and eFunds (funds that are sold only through Fundrise). Although there are a select few opportunities for non-accreditors too, prospects are much better if you have accreditation. 

Finally, Crowdstreet is for accredited investors only and offers both funds (a diversified mix of various projects) or individual deals (meaning you invest in one project only).

Angel investing 

If you like the idea of investing in early-stage companies, consider turning to AngelList. It’s one of the best-known names in the startup world, and it also offers a marketplace for investment. Its unique model involves you being a backer and joining forces with a more experienced investor so you can make investments together.

Bear in mind that startup investment is possibly the riskiest choice of all — you might have heard the statistics that around 90% of businesses fail in their first years. Still, it can be rewarding, especially if you have a good knowledge of the industry you’re investing in.

Non-accredited investors: Best ways to invest

Some of the opportunities above might sound interesting. But if you’d prefer to play it safe by sticking to what you know (or you simply don’t meet the criteria to be an accredited investor), you’ll be pleased to know there are loads of great options for the rest of us.

Funds and stocks

Non-accredited investors might be excluded from hedge funds, but they can invest in stocks, mutual funds, and index funds. These are a pretty mixed bag, so you have plenty of options already. 

Diversified funds like the S&P 500 are some of the best investments for giving reasonably high, stable returns while also having minimal risk exposure (over the long term), so they’re a common choice to make up the bulk of an investor’s portfolio.

You can invest in them through trading apps like Robinhood or more traditional brokers like Fidelity or Charles Schwab.

Alternative investments 

Or, if you feel like branching out a bit more, why not consider something slightly more adventurous like precious metals or cryptocurrencies? These provide extra diversification since they respond to different market triggers to stocks, which helps to balance your portfolio.

You can also access alternative investments such as peer-to-peer lending (P2P) and some crowdfunding. Prosper is a popular P2P marketplace that offers opportunities for investors by letting you lend directly to your “peers” for a return.

As we’ve seen already, crowdfunding platforms sometimes only offer limited opportunities to non-accredited investors, but you’ll still have some potential to earn this way.

Don’t forget to keep track of your portfolio

Whether you end up deciding to be an accredited or non-accredited investor, there are some universal investing principles that you’d do well to adhere to. One of them is keeping track of your portfolio.

It can be tough to know how everything is performing when you have a range of assets in your portfolio, especially if you’re an accredited investor investing in all kinds of weird and wonderful assets outside of the scope of most people.

To help you along the way, use a portfolio tracker, which connects all your investment accounts (and liabilities) in one place to give you a live calculation of your net worth and other important financial variables.

Using Money Minx to track your investments 

Money Minx is a portfolio tracker like this, and it allows you to add more than 16,000 different accounts — from cryptocurrency wallets to bonds to your mortgage. Even some of the accounts are reserved for accredited investors (but if your platform isn’t supported, it’s okay, you can add it manually instead.

Once you’ve connected your accounts, you’ll end up with a dashboard like the one below. This not only contains a live estimation of your net worth but also reveals how it’s changed over time, so you can figure out who your poor performers and overachievers are.

Plus, you can check out your current allocation in the simple visualizer below. If you’re experimenting with lots of different investment types and figuring out what to go with, this is a great way to rebalance your portfolio along the way. 

Be the investor you always wanted to be

Just because you can become an accredited investor and start joining hedge funds, it doesn’t necessarily mean you should. Some people prioritize profitability, while others like to stick to familiar choices — there’s no single correct route to investing. 

However, it’s a smart idea to make sure you’re aware of the different options out there — in this case, accredited vs. non-accredited – and to optimize for whatever your investments are by tracking them along the way.

A portfolio tracker like Money Minx is the most convenient and effective way to do this. Just log into one platform and see how everything is performing immediately — then use what you’ve learned to continuously finetune your investments. Why not create your free account today and see how it can help you?

Sarah Bromley is a personal finance and fintech writer based in the U.K.

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