Best Investment Opportunities for Non Accredited Investors

For non-accredited investors finding high-quality investment opportunities can sometimes feel limiting. However, in recent years, the landscape has evolved significantly, opening up a range of accessible options across various asset classes. From real estate crowdfunding platforms and peer-to-peer lending to diversified exchange-traded funds (ETFs) and robo-advisors, non-accredited investors now have more avenues to grow their wealth than ever before.

This guide will explore some of the best opportunities that allow you to build a diversified portfolio, tap into passive income streams, and achieve your financial goals without the need for accreditation.

Who are Non-Accredited Investors?

Non-accredited investors are individuals who don’t meet the financial requirements set by the SEC to qualify as accredited investors. Generally, to be considered accredited, an individual must have an annual income of at least $200,000 (or $300,000 combined with a spouse) for the past two years, or a net worth of over $1 million, excluding the value of their primary residence. Non-accredited investors fall below these thresholds and thus have limited access to certain high-risk investment opportunities.

The investment options for non-accredited investors may be more limited to publicly traded stocks, bonds, mutual funds, and other traditional investment vehicles that are available to the general public. These individuals may also face restrictions on the amount they can invest in certain opportunities to protect them from risky ventures that could potentially result in substantial financial losses.

6 Best Investment Opportunities for Non-Accredited Investors

Here are six of the best investment opportunities available today for non-accredited investors, each designed to offer accessibility, potential returns, and a way to diversify your portfolio without needing to meet strict financial thresholds.

Peer-to-Peer Lending

Peer-to-peer (P2P) lending platforms allow individuals to lend money to borrowers, cutting out traditional financial intermediaries such as banks. P2P lending can be an attractive investment opportunity for non-accredited investors because it provides high yields with low barriers to entry. Additionally, many P2P lending platforms offer sophisticated credit analysis tools and automated investment strategies.

Pros

• Potentially high yields compared to other fixed-income investments
• Diversification of portfolio with access to a broad range of loans
• Low minimum investment amount

Cons

• Potential for defaults or late payments from borrowers
• Lack of liquidity as loans typically have long terms
• Risk of fraud or platform failure

Real Estate Crowdfunding

Real estate crowdfunding has opened up the possibility of investing in real estate for non-accredited investors. Crowdfunding platforms pool funds from a large number of investors to invest in real estate projects, such as apartment buildings, commercial properties, or new developments. Investors receive a share of the rental income or profits when the property is sold.

Pros

• Access to real estate investments with low barriers to entry
• Diversification of portfolio with exposure to different real estate markets
• Potentially high returns from rental income and property appreciation

Cons

• Lack of control over investment decisions
• Limited liquidity as investments may have long holding periods
• Risk of project delays or overruns, leading to lower returns

Business Development Companies

Business development companies (BDCs) are public companies that invest in small and medium-sized businesses. They provide financing to these companies through debt and equity investments and receive interest income and dividend payments. BDCs can provide non-accredited investors with exposure to high-growth companies that may not be available in the public markets.

Pros

• Access to high-growth companies with limited public market exposure
• Diversification of portfolio with exposure to different industries and business models
• High dividend payments due to BDCs' tax structure

Cons

• Higher risk compared to more established companies
• Limited liquidity as shares may be illiquid and difficult to sell
• High fees and expenses associated with BDCs

Equity Crowdfunding

Equity crowdfunding is similar to real estate crowdfunding, but instead of investing in real estate, investors purchase equity in startups or early-stage companies. Equity crowdfunding can provide non-accredited investors with an opportunity to invest in innovative new companies, with the potential for significant returns.

Pros

• Access to startup and early-stage companies with high growth potential
• Diversification of portfolio with exposure to different industries and business models
• Potential for high returns if the company is successful

Cons

• High risk due to the early stage of the companies being invested in
• Lack of liquidity as investments may be illiquid and difficult to sell
• High potential for loss if the company fails

Royalty-Based Investments

Royalty-based investments allow investors to purchase a share of future royalties from a product or technology. This attractive investment opportunity for non-accredited investors provides exposure to innovative products and technologies, without the risks associated with equity investing.

Pros

• Access to innovative products and technologies
• Low correlation with other investments, providing diversification benefits
• Potentially high returns 

Cons

• Lack of control over the investment, as the company retains ownership of the product or technology
• Limited liquidity as investments may have long holding periods
• High risk if the product or technology fails to generate royalties

Cryptocurrency

Cryptocurrencies, such as Bitcoin and Ethereum, have gained in popularity in recent years as a new asset class for investment. While the risks associated with cryptocurrencies are well-known, they can offer non-accredited investors an opportunity to participate in a rapidly growing and evolving market.

Pros

• Potential for high returns from the volatility of cryptocurrencies
• Diversification of portfolio with exposure to a new asset class
• Low barriers to entry with many platforms, allowing for easy purchasing of cryptocurrencies

Cons

• High risk from the volatility and lack of regulation of the cryptocurrency market
• Lack of understanding of the technology and investment risks by many investors
• Potential for fraud or theft of cryptocurrencies

Making Strategic Investments

While investing has traditionally been reserved for accredited investors, the rise of new financial regulations and technologies has opened a range of investment opportunities for non-accredited investors. From P2P lending to real estate crowdfunding, BDCs, and cryptocurrency, non-accredited investors can access a wide range of investment opportunities with the potential for high returns.

However, it is important to understand the risks associated with each investment and how to diversify your portfolio to minimize those risks. By carefully considering these six investment opportunities, non-accredited investors can build a diversified investment portfolio that suits their financial goals and risk tolerance.

Frequently Asked Questions