These investors are permitted to invest in several types of high-risk investments such as angel investments, hedge funds and limited partnerships. An accredited investor designation requires that an individual have a minimum net worth of $1 million or more. For persons who are single, they may become accredited investors if they have earned a minimum of $200,000 in preceding years. If the individual is married, they need to have earned a minimum of $300,000 in the previous 24 months.
The Securities and Exchange Commission (SEC) is mandated with deciding which investors are allowed to invest in certain kinds of investments with high risk. In summary, accredited investors must fulfil at least one of three conditions: a) have a net worth that is in excess of $1 million; b) have earned a net income, for the past two fiscal years, in excess of $200,000 in the previous two fiscal years and expect that they will earn as much in the coming year; or c) have a joint income (with their spouse) of $300,000 for the previous two years, and expect to earn as much in the coming year.« Back to Glossary Index