Alternative Assets and the ‘Average’ Accredited Investor Installment #1

Who Is the Accredited Investor?

This series of articles is written for the average ‘accredited investor.’

An ‘accredited investor’ is a legal term that refers to anyone who falls into the following categories:

1. A person whose net worth, either alone or with a spouse (or spousal equivalent), exceeds $1 million (not including the positive equity in her or his primary residence).
2. A person who has earned more than $200,000 (or $300,000 with a spouse or spousal equivalent) for the past two years and reasonably expects to earn more than $200,000 (or $300,000 with a spouse) in the current year.
3. A person who holds certain professional certifications, designations, and credentials, as designated by the SEC.
4. Knowledgeable employees of a private fund (e.g., hedge fund, venture capital fund, or private equity fund). They include trustees and advisory board members, and exclude employees who solely carry out clerical, secretarial, or administrative functions at the fund. Employees are required to have participated in investment activities at the fund for a minimum of 12 months.
5. The following entities also fall within the definition:

• Any entities with more than $5 million in investments.
• Limited liability companies with more than $5 million in assets.
• SEC- and state-registered investment advisers and exempt reporting advisers.
• Rural business investment companies (RBICs).
• Family offices, or family clients of family offices, with more than $5 million in assets under management.

You may notice that this definition captures a wide net of investors. In 2020, the SEC expanded the definition beyond income and net worth thresholds to include investors with “reliable alternative indicators of financial sophistication.”

In this case, our series is written for the ‘average’ accredited investor. What do we mean by this? We mean the vast majority of accredited investors who earn less than $5 million dollars a year and who are worth less than $25 million. Beyond these numbers, we’re also referring to investors with sufficient knowledge and expertise who are either professionally certified or work for a private fund.

Our thinking is that if you meet these minimums, you are probably already aware of the things this series would otherwise tell you, or are well advised by the right professionals.

This series is not for the ultra-affluent. If your family was once featured on Lifestyles of the Rich and Famous, or if you have never flown commercial, this series is not for you.

Nor is this series for start-ups or the entrepreneurs behind them. There are plenty of resources for these groups — literally hundreds of ‘accelerators,’ scores of podcasts, dozens of excellent magazines and websites.

Finally, this series is also not for the would-be speculator who is interested in trading options, futures, or commodities. It is also not for the gambler-fad monger who is thinking about the next ‘hot’ thing (i.e., most cryptocurrencies) to invest in to make a quick buck.

What’s the Significance of Being an Accredited Investor?

In a nutshell, accredited investors are able to participate in certain alternative investment opportunities that are not otherwise available to non-accredited investors. Examples include private equity, venture capital, angel investments, hedge funds, and private placements, all of which are considered ‘alternative assets.’

In our Financial Poise Glossary, we define an ‘Alternative Investment’ as one that doesn’t fall under the categories that are considered to be traditional (such as stocks, bonds and cash). They tend to have long investment horizons and be complex in nature. They are less regulated and are not as liquid as traditional investments.

Alternative investments can be made in the form of antiques, precious metals, rare stamps, coins, sports cards, and other collectibles. They also include private shares in startups, commodity pools, over-the-counter contracts, and so on. Essentially, an alternative investment is anything a financial advisor at a bank wouldn’t steer a client toward. These investments are not considered mainstream and, as such, are not easily managed as part of a traditional investment portfolio.

What Is the Purpose of This Series?

Our purpose is to introduce you to the private markets for alternative investment opportunities (that is, alternative assets) that are available to accredited investors and to educate you about how they operate. Our goal is not to try to sell you on any particular investment or investment class.

You most likely already have traditional investments in the stock market (whether by direct ownership or by owning shares of mutual funds), bonds, and/or real estate. Our basic mission is to provide you with objective and reliable information that you can use to decide for yourself if you should diversify into the brave new world of ‘alternative assets’ and, if the answer is yes, to help you so you can do so on an informed basis.

Why Is This Series Important?

Up until 2012, the federal securities laws prohibited the advertising of accredited investment opportunities. Most accredited investors were consequently completely in the dark about them. This changed as a result of the Jumpstart Our Business Startups Act (or ‘JOBS Act’ for short), signed into law on April 5, 2012.

Under the JOBS Act, entrepreneurs, companies, private equity and venture capital funds, hedge funds, and others are able to advertise investment opportunities and solicit investments from accredited investors. The JOBS Act is also the law that legalized equity crowdfunding.

More recently, in March 2025, the SEC issued new guidelines that simplify the process for verifying whether an investor has accredited investor status. Under its new guidance, investment funds (as well as any entity selling securities) will have taken reasonable steps to verify their investors if the investors:

1. Meet a minimum investment amount of $200,000 for natural persons and $1 million for public entities, and
2. Provide written representation.

This drastically reduces the burden placed on fund managers and others seekng investment capital who previously had to perform thorough verification checks on investors. This also reflects the SEC’s increasingly liberal position, as this change is slated to lower the verification standard, while attracting a wider pool of accredited investors.

Jonathan Friedland, the founder of Financial Poise, predicted this trend toward alternative assets as early as 2012. In his 2014 book, The Investor’s Guide to Alternative Assets, he wrote:

“Because of the JOBS Act, accredited investors are going to learn more and more about the existence of the world of alternative assets. No longer will this world be confined to those who read The Wall Street Journal cover to cover each day.

Rather, you are [hearing] about it on television shows like Today and Good Morning America, on your morning talk radio station, or through banner ads [on social media]. This is a good thing, since the opportunity to diversify into alternative assets offers accredited investors the potential for greater overall investment returns and smart diversification.”

Having a little bit of knowledge can be dangerous and mass media coverage will not sufficiently educate you on whether alternatives are for you. This series, however, will.

We also hope to serve as a counterbalance to a proliferation of information sources that appear on the surface to be objective but are anything but. When looking at a website, for example, ask yourself these questions:

• Are the articles bylined? In other words, is it clear who the writer is? If not, stay away.
• Are biographies of the writers on the website? If not, stay away.
• Does the website accept advertising or paid content from participants in the investment field? If yes, stay away.

If the answer to any of these questions is ‘yes,’ then consider how its objectivity is possibly impacted.

Read More

While we encourage you to read this series in order, you certainly don’t need to. Each installment is designed so it can be read as a stand-alone article. Here they are in case you want to skip around:

• Alternative Assets and the ‘Average’ Accredited Investor Installment #1: Who Is This Series For?
• Alternative Assets and the ‘Average’ Accredited Investor Installment #2: Meet Bob, Michele, David, and Isabella
• Alternative Assets and the ‘Average’ Accredited Investor Installment #3: Overview of the Jumpstart Our Business Startups Act of 2012
• Alternative Assets and the ‘Average’ Accredited Investor Installment #4: Overview of the Alternative Assets Landscape
• Alternative Assets and the Accredited Investor Installment #5: Crowdfunding & Rewards-Based Beginnings
• Alternative Assets and the Accredited Investor Installment #6: Equity Crowdfunding Under Regulation D
• Alternative Assets and the Accredited Investor Installment #7: Crowdfunding Under Title III of the Jobs Act
• Alternative Assets and the Accredited Investor Installment #8: Venture Capital & Angel Investing
• Alternative Assets and the Accredited Investor Installment #9: Venture Capital Investing
• Alternative Assets and the Accredited Investor Installment #10: Private Equity, aka PE Investments
• Alternative Assets and the Accredited Investor Installment #11: Investments in Hedge Funds
• Alternative Assets and the Accredited Investor Installment #12: Tangible Investments

Who are ‘We’?

You will notice that throughout this series, I use the term ‘we.’ This is done to acknowledge the great editorial assistance of the Financial Poise Editorial Team. This series is based on my book The Investor’s Guide to Alternative Assets: The JOBS Act, ‘Accredited’ Investing, and You.

This article was originally published on December 14, 2018.

©2025. DailyDAC^TM, LLC d/b/a/ Financial Poise^TM. This article is subject to the disclaimers found here.