Am I an Accredited Investor?  Why It Matters (and Why It Doesn’t)

by The Darwinian Doctor

Today you’ll learn if you’re an accredited investor, what this means in today’s dollars, and how this affects your ability to invest your money.

This post may contain affiliate links.


When it comes to investing, it sometimes seems like all the good stuff is reserved for only a select few. 

If you’ve ever felt this way, it’s completely understandable. 

When a hot tech company has an IPO, there are some people that were able to buy shares of the company at the pre-IPO prices.  And when a certain industry like real estate goes through a boom, there are some people that are already invested in these assets, ready to ride the wave to huge profits. 

There’s a reason why most people don’t have access to these deals, though. More often than not, these types of investments are restricted to “accredited investors.”

Accredited Investors

Accredited investors are high income or high net worth individuals that have the ability to invest into opportunities that are not formally registered with financial authorities. The Securities and Exchange Commission (SEC) categorizes these investors as financially sophisticated and less reliant on the protections of regulatory disclosures.

There are many investments that are categorized as higher risk, yet do not have to be officially registered with the SEC. They are “exempt” or private deals. To protect less sophisticated investors from the higher risk, the SEC rules permit only certain classes of investors to invest into these deals. 

Am I an Accredited Investor?

How do you know if you’re an accredited investor?  It’s fairly simple. 

The current (as of 2024) definition of Accredited Investor is:

  • Income over $200,000 (individually) or $300,000 (with spouse or partner)
  • Net worth over $1 million, excluding primary residence (individually or with spouse or partner)

These are considered the financial criteria to be called an accredited investor, and it’s the way that most people qualify.

There are a couple of fine details.  If you’re qualifying by income, you need to have made that income for at least the prior 2 years. Also, you need to reasonably expect that income to continue. 

Why are some deals restricted to Accredited Investors?

The existence of this type of investor classification is a good example of the government trying to protect people from themselves.  In the US, only legal adults are allowed to buy cigarettes or alcohol, or go to the casino and play roulette.  It’s the same situation when it comes to investing:  only accredited investors are allowed to invest into deals that are higher risk due to their exemption from SEC registration.

Does this actually make sense?  I think it’s debatable.  There’s plenty of risk already available to investors, accredited or not. Virtually anyone can create an E*TRADE profile and trade individual stocks on margin. I firmly believe that this is basically gambling for the vast majority of investors. Therefore, I don’t see why any type of investing should necessarily be restricted. 

Examples of deals restricted to Accredited Investors

Here is a list of types of deals that are typically restricted to accredited investors:

  • Real estate syndications
  • Hedge funds
  • Venture capital funds
  • Private equity funds
  • Direct investment into private companies
  • Oil, gas, and mineral rights partnerships
  • Private debt offerings

Famous figures from Peter Thiel to Carl Icahn have made billions off these types of investments.

Why the term Accredited Investor Doesn’t Matter as Much Anymore

Now that I’ve gotten you so excited about the term “accredited investor,” here’s why it actually doesn’t matter as much anymore.

If the term “accredited investor” was a person, it would be ready for a midlife crisis!

The term entered federal law in 1978 and was fully defined in 1982 by Rule 501, which set the required individual income of $200,000 or a net worth of $1 million. 

This term sat relatively untouched until 2011, when the Dodd-Frank act revised the rules to exclude your primary home from the accredited investor net worth calculations.  This was in line with a host of other rules to make the finance industry safer in the wake of the financial crisis of 2008.

Aside from this slight change in 2011, there have been no major changes to the definition of the term “accredited investor” for over 40 years! 

Forty Years is a Long Time

Now I have nothing against things that are 40 years old or older (like me).   But when it comes to financial terms that rely on fixed monetary values, 40 years is way too old. 

To understand why this I’d say this, let’s look at the income of an accredited investor in 1982 and compare it to an inflation adjusted accredited investor in 2024.

From this chart, you can clearly see that it was very different to be an accredited investor in the 1980s vs 2024.

To make the same income now as someone who made $200k in 1982, you’d have to make over $650k in today’s dollars!

And to be worth the same amount of money as an investor in 1982 with $1 million, you’d have to have a net worth of $3.27 million in today’s dollars!

What Is the Significance of This?

I’m not going to comment on the ethics of grouping investors into classes based on income and net worth.  While I understand the purpose, I think the existence and accessibility of risky investments really erodes any value of that distinction. 

The SEC has not adjusted the requirements to become an accredited investor for the last 40 years (despite reviewing it every 4 years since 2011). Since it has not adjusted the definition, I believe the SEC is tacitly increasing access to more types of previously restricted investments.

A example: the new doctor and the real estate deal

Let’s look at an example of an accredited investor in 2024. 

You’re a new family medicine physician in your third year of practice.  For the prior two years, you made around $250,000, which is fairly average for your specialty.  You’re single and live quite frugally, so you have saved up a nest egg of $50,000.  It’s sitting as cash in your checking account because you’re not sure what to do with it.

Thankfully, you’re educated in basic personal finance, so you are living within your means. You can already cover your basic expenses such as rent, food, and disability insurance. You are also saving for retirement via your Roth IRA and 401k. 

See my recommended disability insurance providers here.

You’re making good progress on paying back your student loans, but you still have about $150,000 left.  Overall, your net worth just hit about $150,000, including your 401k from residency training. 

You follow the Darwinian Doctor blog and read that Daniel Shin started Cereus Real Estate to offer passive real estate investments to high income professionals. 

After reading this blog post, you now understand that you’re an accredited investor by virtue of your income for the last two years!

A great deal come up on the Cereus Real Estate investor newsletter.  You have the opportunity to invest $50k into a multifamily property, with projected returns of about 20% annually for the 5 year hold period.  It’s a 506c deal, so only accredited investors are allowed to invest.

Should you do it? 

Well, you’re absolutely right. You technically meet the qualifications and you’re an accredited investor. But I would argue that investing a third of your net worth and all your liquidity into one investment is not a fantastic idea.  At least for me, I would ideally wait until my net worth was higher before making such a large investment into one area. 

With a higher net worth, I can make such an investment knowing that even if the deal doesn’t do well, it won’t negatively affect my overall financial picture that much.

Long story short, even an investment opportunity that offers potentially high returns shouldn’t compel you to take unnecessary risks with your precious dollars.


Now you know all about accredited investors, including the income and net worth criteria required to meet this threshold. You also understand that this definition doesn’t mean what it used to in the 1980s. Since the criteria haven’t been adjusted for inflation, there are more private deals than ever that are available to high income professionals.

Should you take advantage of your high income and invest into private deals? I think it’s all a matter of your risk tolerance and overall net worth.

Even though net worth isn’t as useful as you might think, it’s still a good barometer of your ability to withstand financial risk.

Daniel Shin, MD

The Darwinian Doctor

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