Accredited Investor: Definition, Requirements, Example

What Is an Accredited Investor?

Key Points

Accredited investors can access high-risk, high-reward investments not open to the public.
To qualify, one needs $200K income, $1M net worth, or specific financial licenses.
These exclusive opportunities include early-stage startups and commercial real estate.

There are some investment opportunities that are open to the public, such as the stock market. But there are also some investments that not everyone can participate in, such as private equity deals, commercial real estate crowdfunding, and venture capital.

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An infographic defining and explaining the term "accredited investor" — Source: The Motley Fool

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Asset

An asset is a resource used to hold or create economic value.

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So if an individual had annual income of $220,000 in 2021, $250,000 in 2022, and is on track to earn $275,000 in 2023, but only had a net worth of $200,000, they would qualify as an accredited investor just by income. Additionally, if an investment professional who recently graduated college passes the Series 7 examination, they could be considered an accredited investor even if their income and assets are far below the thresholds.

Directors, executive officers, or general partners of the company selling the securities are also considered accredited investors, regardless of their income or assets. And there are several ways that businesses or other entities can qualify as accredited investors. For example, corporations with more than $5 million in assets will qualify.

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst specializing in the real estate and financial sectors. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, Globe St, The National Desk, and other TV networks and publications for his real estate, financial, stock market, and investing expertise.

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Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Tesla. The Motley Fool has a disclosure policy.