Becoming an accredited investor should be your goal if you’re looking to live off investments one day. That’s because accredited investors are able to participate in a wider range of investments than their retail counterparts. Having a wider range of investments available allow for a more diversified portfolio along with a better performing portfolio as investments available can produce outsized returns.
Put simply in the public markets if a retail investor is making a 6.9% return on stock investments without being a trader their performing in line with the market. Accredited investors during the same period on average will earn 4-5% more.
Retail vs Accredited Investors
The difference between retail and accredited investors is straightforward. Accredited investors are individuals who have an income of $200K a year ($300K for couples) or combined assets worth over $1M, excluding your primary residence. There are some other ways to become an accredited investor but having a high income or a high worth of assets are the most common.
Retail investors are those who don’t classify as accredited investors.
The rationale for separating the two is because of risk. Accredited investors can invest in more types of things, however, with alternative investments comes increased risk in most cases. Basically, because accredited investors have more money, they’re able to take more bets. The issue with being able to take more bets, are the potential losses, so if you’re newly accredited or want to see what’s out there here are some investment opportunities for accredited investors.
Something you’ll notice about accredited investment opportunities are that outside of venture capital firms and hedge funds, quite a bit of the opportunities exist in real estate.
Realty Mogul investments is a unique investment platform that is built for accredited investors but because of its crowdfunding nature allows for participation by retail investors as well.
Realty Mogul lets anyone with $5K start investing in real estate deals. They work directly with developers to source early stage deals which historically provide outsized returns. Accredited investors have access to the entire platform to source the deals that suit them best while retail investors are limited to investing exclusively in REITs. For more information on the difference and specific features of the platform, it might be advantageous to read a Realty Mogul review.
At a high level, they are a great platform if you’re starting out in real estate investing and investing as an accredited investor. Currently, they have $5.9B worth of investments available on their platform, with more added continuously. If you’re interested in seeing exactly what they have to offer, it is worth checking out the Realty Mogul website.
Unlike Realty Mogul which places a high value on REITs, EquityMultiple is focused on gaining outsized returns by not focusing on REITs. Instead, EquityMultiple combines traditional real estate investments with crowdfunding opportunities to try to give its investors outsized returns.
Historically, it has outperformed the public market and private equity firms every year, with a return rate of about 17.4%. These returns are made possible by a few contributing factors. The two main reasons they are able to outperform are their backing from Mission Capital Advisors and their in-house underwriting. You can find more information about both from an EquityMultiple review.
Alternatively, if you’re interested in looking around the site directly you can click here.
At a $25K minimum deposit Crowdstreet can be an expensive platform to use. However, Crowdstreet does not charge investors any signup fee and has one of the largest and most helpful educational resources from any investment platform.
The feature that really stands out is the due diligence work Crowdstreet does. Which as a new to investing accredited investor is incredibly helpful as it takes away some of your responsibilities.
Additionally, as far as platforms go, Crowdstreet is very intuitive which goes along with its educational focus. Meaning you could potentially find more and better deals faster.
Which Platform Should I Use?
There are even more platforms and opportunities out there if you’re an accredited investor. What ends up being the right platform for you will largely depend on a couple of points.
First, how much cash do you have to invest at one time, and what portion of your total investments will that equate to. This is important to consider because, for every company or development that scales to be worth multiple millions or billions, most don’t.
Which is the second point you should consider, what are your risk and liquidity preferences. Risk and liquidity are combined because investments solely for accredited investors tend to have long investment terms. This means if you invest $25K today you might only be able to cash out of your investment in 10 years.
The third point you may want to consider is the rate of return. Again, some companies and assets grow dramatically in value while others do not. So, taking time and considering what an investment has to offer is of the utmost importance.