Accredited Investments: What Nobody Wants You to Know

Did you know that there are almost 20 million Accredited Investors in America?

That’s around 15% of U.S. households, which is surprisingly higher than I thought.

What is an Accredited Investor?

It is someone with a $1 million net worth (not including their primary residence value or mortgage)

OR

A single person who has $200,000 per year in taxable income 2 years in a row or a married couple who has $300,000 per year in taxable income 2 years in a row.

What does being an Accredited Investor allow someone to do?

For the most part, it allows them to invest in private investment opportunities that are reserved for Accredited Investors only. These can be private funds, private equity, life settlements, or even venture capital or Angel Investor deals.

I’ll be honest, I used to be really focused on becoming Accredited and I accomplished it well before the age of 30. I was investing in several Accredited only investment deals but I experienced 2 problems.

First, even though I was Accredited, I wasn’t Financially Independent. Financially Independent means that the passive income I earn from by businesses and investments exceeds my Generosity, Expenses, Savings, and Taxes. This is the real goal and for a moment I made being an Accredited Investor the real goal so that I could get access to these special investments.

The bland reality and what I’ve learned now is this: If I was investing in certain assets to go from $0 to Accredited, it means those investments were successful and reliable and I should not change them just because I became Accredited all the sudden.

This was my mistake. I invested one way to become Accredited…and if you think about it, the things I was investing in that took me literally from $0 to $1 million were nothing to turn my nose up at. But because they were magical “Accredited Investments”, as soon as I hit $1 million I did turn my nose up at them and began going all in on the deals I newly had access to. This would be like a fast-food restaurant that sells burgers and fries setting a growth target and selling burgers and fries to achieve that growth target and then once achieved, deciding now it was time to start selling chicken instead. That would destroy the business. Today, I am Accredited, but I actually don’t invest in a single Accredited Investment myself. I went back to the things that were working for me and as a result, I am now both Accredited and Financially Independent.

When will I invest in Accredited Investments? When I achieve a specific passive income goal of mine. Then I’ll feel like my passive income sources are producing enough for me and will only continue to expand and I can change my focus to Accredited Investments (which by the way usually aren’t passive income generating and are more focused on equity gains).

That was only the first issue. What was my 2nd issue?

Around 70% of Accredited Investments fail. Yeah, that’s right. 70%. That’s a HUGE failure rate. And I experienced it first-hand. I had 3 Accredited investments and out of the 3, 2 of them failed. 1 was a total loss and I’ll never see that money come back. The other, I might get 30–50% of my investment back but it’s been a few years since this fund failed and it might be another few years before that 30–50% of my original investment is returned. This was a wakeup call for me because I went from being very close to Financial Independence (like 6 months away from achieving it) to losing most of my progress and going back to the drawing board.

You see, most of us look for Accredited Investments because we want to escape Wall Street. What is Wall Street? Basically, publicly traded stocks and bonds.

We leave Wall Street and if we’re Accredited, rush into Accredited Investments. What we don’t always understand is that Accredited Investments are simply privately traded stocks and bonds.

It’s the same food, just from a different restaurant. And at least with Wall Street, the regulation is higher (there is almost 0 regulation with Accredited Investments). And with Wall Street, if I don’t like an investment, I can sell it to almost anyone (with most Accredited Investments I am not allowed to resell them to anyone and I’m stuck with the asset unless the company gives my money back).

I’m not vouching for Wall Street here at all and I do believe at the right time, Accredited Investments can be beneficial. But that time is after you’re already Financially Independent and when you really understand the Accredited Investments you’re going to put money into. Afterall, a fund, whether private or public, is just someone else’s business. And when you invest in the fund, you are investing in that business, the owner, the management, the staff, and the customers. You don’t own the assets the business invests in. You own shares of the business itself and the business owns the assets. So, you better understand the business even more than the assets it invests in.

If you’re not Accredited yet, it is a cool milestone, but that’s all it is: A milestone. The real goal is Financial Independence.

If you are Accredited, if you’re not Financially Independent, you’ve got the carriage in front of the horse. I would take a few steps back and focus on higher yielding assets where you have less risk and more control and simply repeat those over and over and over until you are Financially Independent. Then you can look into Accredited Investments again.

In closing, my mission in life is to help good people build more wealth who make the world a better place.

So, if you’re a good person who wants to help make the world a better place and this article helped you, I want to encourage you to start planning your next quarterly trip and putting this into practice. And feel free to write to me and let me know how it went.

If you’re a client of mine and you’d like help leveling up, send an email to my team with “Level Up” in the subject line to Contact@WealthDynamX.com.

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The Blueprint to Financial Freedom by Jerry Fetta

To Purpose, Wealth & Freedom,

Jerry Fetta

Jerry Fetta is the CEO and Founder of Wealth DynamX. He is a nationally recognized financial expert featured in Forbes, Yahoo Finance, Fox, Chicago Weekly News, New York Finance, interviewed on 100+ podcasts with world renowned experts, earning endorsements and affiliations throughout his career with names like Kevin O’Leary, Grant Cardone, Dave Ramsey, and Pamela Yellen.

Jerry’s mission in life is to help create millions of financially educated and solvent families achieving greater financial freedom and sharing the truth about money with those around them.

Learn more at www.WealthDynamX.com

(DISCLAIMER: The information in this content should not be considered tax, financial, investment, or any kind of professional advice. Only a professional diagnosis of your specific situation can determine which strategies are appropriate for your needs. Wealth DynamX can and does not provide advice unless/until engaged by you.)