Advantages of a Regulation D Accredited Investor
An accredited investor is a category of investors first introduced after the financial crisis of 2008 to make a distinction between the average investor and the financially savvy investor. This type of savvy investor is a Regulation D accredited investor, for it is under this Regulation they are given opportunities to invest in particular types of securities only available to this investor category. Regulation D offerings may only receive investments from wealthy accredited investors, while Reg A+ offerings may receive investors from any income level.
Some of the advantages of accredited investors include:
Access to More Opportunities
With accredited investor status, you have access to a larger swath of investment opportunities, including venture capital, real estate private equity funds, hedge funds, and more. It is like being allowed into a private club. Investors can find some opportunities online. Others are shared between accredited investors at private functions of which the retail investor population is unaware because of regulations.
By investing in different areas, one can diversify his or her portfolio effectively. The different investments may respond differently to market events, minimizing any net loss due to market volatility. A Regulation D accredited investor, with access to various investment products, can diversify through investments in private assets that are not correlated as much with each other and thus reduce the negative effect of market swings. For example, commercial and industrial real estate are types of investments that are not tied as much to the activity of the stock market.
Investors often pursue investments with higher yields. An accredited investor can make investments in private deals with higher yields and not be restricted to lower-yield dividend-paying stocks, bonds, and REITs.
As previously mentioned, a Regulation D accredited investor has access to private deals. Even though not every investment offered through private deals guarantees higher returns, the higher risks of these investments usually mean the returns are also higher.
It is important to be careful and diligent when investing as an accredited investor and gain as much knowledge of the product or service that is the investment.