10 Things Every Accredited Investor Needs to Know

The alternative investment universe is a complex landscape with many opportunities and pitfalls for accredited investors. By seeking guidance, knowledge, and objective counsel, investors can make the best decisions for their portfolio and assets. The more that accredited investors know about the alternative investment universe, the better decisions they’ll be able to make.

So what should every accredited investor know?

  1. The types of advisors available. Not all financial advisors are created equal. In general, there are three advisors that accredited investors will work with: investment advisors, broker-dealers, and insurance agents. Investment advisors offer advice on securities, broker-dealers recommend, purchase and sell securities, and insurance agents focus on insurance products, which are regulated through state laws.
  2. The risk. The reason the SEC has such a strict definition of accredited investors is to protect the general public and the economy from liability. In other words, most start-ups fail, thereby losing investors’ money. Still, accredited investors still often search for risk-worthy endeavors that could yield incredible results.
  3. General investment principles still apply. Even though accredited investors have special privileges, the general strategies of investing remain the same. For instance, it’s always better to invest in multiple deals than to place your bets in a single basket.
  4. Patience is needed. One of the primary differences between an accredited investor versus an “average” investor is that the accredited understand the patience that investing demands. Even if a start-up becomes successful, it could take years before the company takes off. Even Google would take a decade to solidify itself as a cornerstone of the internet.
  5. Have an exit strategy. When making an investment, always consider the exit strategy and understand what and when it will be. If a company can’t give you an exit strategy or a list of their potential competitors, then think twice before investing in that organization.
  6. A family office can help. If you’re overwhelmed with your financial portfolio or don’t have the time to do the things you love, remember that a family office can simplify your responsibilities. Plus, you’ll enjoy the benefit of having experts guide you through every major decision.
  7. Have a pre-determined amount of liquidity. Always be ready to write the check. This way, if an opportunity arises, you have the money on hand to be able to invest. Many accredited investors have to wait to liquidate a stock, costing them precious time as the opportunity passes by.
  8. Study the marketplace. The market is always changing. The recent SEC intervention into equity crowdfunding, for instance, will impact the market in both foreseeable and unpredictable ways. Staying abreast of the latest news will ensure that you continue to make the wisest decisions.
  9. Your advantages. Remember the advantages that you have as an accredited investor. The more you understand and pursue these advantages, the higher your potential return will be.
  10. Keep family first. Family offices often have to intervene with complex familial issues. No matter how affluent your household becomes, always remember to keep loved ones first and everything else will fall into place. Family offices can also provide intangible benefits to your family such as financial education, preservation of family legacy, or facilitating the involvement of some or all family members in decision making or philanthropic activities.

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