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How To Qualify For Exclusive Investment Opportunities

For the longest time, the wealthy were wealthy not only because they invested in different asset classes than everyone else but also because they had access to many investments nobody else had access to.

Instead of investing in traditional assets like stocks and bonds that anybody could invest in, the wealthy gravitated towards exclusive alternative assets not found on the public markets. The two assets they allocated to the most were:

  • Commercial real estate (CRE).
  • Private company investments in income-producing businesses (i.e., private investments or private equity).

The wealthy valued CRE and private equity for cash flow, appreciation, tax benefits, and noncorrelation to Wall Street – giving investors distinct advantages over stocks and bonds.

Why Private Investments?

Private investments offer more than Wall Street can but without the volatility. This fact is backed up by research from Cambridge Associates, a private investment firm (“CA”), which found that private investments have provided the strongest relative returns compared to traditional assets for decades. Private Investing for Private Investors: Life Can Be Better After 40(%). (2019, February).

CA data supports the outperformance of private investments over 5, 15 and 25-year periods:




So, why were favorable private investments exclusive to the wealthy?

That’s because, due to their non-public nature, the SEC imposed advertising restrictions on issuers of these private investments, as well as strict income or net worth requirements for those qualified to invest. As a result, these investments could only be discovered and accessed by those who were connected and those who were wealthy.

These exclusive private investments were what set the ultra-wealthy apart from the middle-class. While the average middle-class investor (i.e., stock investor) experienced less than average results, ultra-wealthy investors routinely saw above-market returns at reduced risk due to the cash flow, appreciation, and non-correlated benefits of assets like CRE and private equity.

If you notice, I’ve been speaking of the exclusivity of private investments in the past. That’s because, due to recent regulatory changes, private investments are now more discoverable and accessible to more investors than ever – not just the rich. Subject to certain rules, private investments can now be advertised, and another important rule change has been the expansion of the definition of an “Accredited Investor” to include more potential investors.

Besides knowing the right people, for decades the gateway to private investments was to qualify as an Accredited Investor.

What is an Accredited Investor?

For individuals, the main qualification criteria involve income or net worth. If you fall within one of the following categories, you would meet the definition of an Accredited Investor:

  • Having a net worth exceeding $1 million individually or combined with a spouse (excluding the value of the primary residence).
  • Have earned income exceeding $200,000 ($300,000 if combined with a spouse) during each of the last two calendar years, with a reasonable expectation of maintaining these income thresholds during the current year.

In recent years, the SEC has expanded the definition of Accredited Investor based on defined measures of professional knowledge, experience, or certifications in addition to the existing income and net worth tests. These include persons holding Series 7, Series 65, and Series 82 securities licenses, as well as persons with certain professional certifications such as doctors and lawyers.

You can now access exclusive private investments.

Private investments are no longer exclusive to the wealthy, but the main requirement of being an Accredited Investor is still a gatekeeper to these opportunities. In fact, many private investments require potential investors to verify their Accredited Investor status right out of the gate. They even use third-party verification services like verifyinvestor.com to verify a potential investor’s Accredited Investor status.

The value of being an Accredited Investor cannot be overstated.

The ability to generate passive income insulated from Wall Street volatility, along with underlying appreciation and tax benefits, is the key to financial independence.

It’s how the wealthy escaped the middle class.

If you’re an Accredited Investor, reassess your portfolio. Are you allocating more to traditional assets or more to private investments?

If the former, then it’s time to reassess and reallocate. If you’re not currently an Accredited Investor, understand the qualification criteria and strive to attain Accredited Investor status. It could change your portfolio performance as well as make a deep impact on your goals of financial independence.

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