Question

I have a question about "unaccredited investors. " There are so many intriguing investment opportunities these days (Fundraise, Lending Club, Worthy Bonds, etc) but they all distinguish between unaccredited and accredited investors. Unaccredited investors are those with a net worth of less than $100k and you can only invest 5% of your net worth if you fall into this category if I'm understanding correctly. What I don't understand is how or whether this is enforced? And whether this threshold applies across ALL crowdsourced investment platforms or just one by one? For example, if I have a net worth of $70k, can I only invest $3500 TOTAL or could I invest $3500 in one platform and another $3500 in another? Are there penalties if you invest too much?  

Answer 1

My guess is 5% in a single vehicle. Usually investments that require you to be an “accredited” investor are higher risk and more likely to go all the way to zero than your typical publicly traded firm. The 5% rule is designed to force you into diversification so you don’t get suckered into putting all of your eggs in one basket.  

Answer 2

With these platforms, 5% is a good rule of thumb regardless of your net worth imo.