24 Million Americans Gain Entry to Investing Market for the Elites
>Inflation increases the number of US-accredited investors by 18.5%.
>Many of them choose gold as an alternative investment.
Wednesday, 20/12/2023 | 15:13 GMT
by Damian Chmiel, Business Intelligence Analyst, Finance Magnates
The number of “accredited” investors in the US has increased significantly over the past few years, largely driven by high inflation rates. According to new data from the Securities and Exchange Commission (SEC), there were over 24 million accredited investor households in the US in 2022, up from 16 million in 2019. This gives them access to markets that are reserved for only a few. Despite this, the average investors prefer to diversify their savings differently, opting for crypto or gold.
More Americans Gain Access to Private Investments amid High Inflation
An accredited investor meets certain financial thresholds and can invest in private securities like hedge funds, private equity, and venture capital. However, just three years ago, only 13% of US households had access to private market investments. The record-high inflation, which drove up prices and consequently led to an increase in earnings, has resulted in a significantly larger number of people exceeding the accredited investor threshold. The number of eligible households has risen by over five percentage points to 18.5%. Source: SEC
One of the main reasons behind this rapid increase is that the financial qualifications for accredited investor status have not kept pace with inflation. To qualify, an individual must have $200,000 in annual income or $1 million in net assets, excluding their primary residence. However, these thresholds have stayed static since they were first introduced in the early 1980s.
Accounting for inflation, the income threshold would now need to be over $900,000 for a couple, or the net worth threshold would need to be around $3 million. If adjusted accordingly, only 5.7% of US households would currently qualify as accredited.
- Nearly half of U.S. households will qualify to invest in sometimes lucrative, often risky private markets deals as accredited investors by 2042, the SEC estimated in a report last week. Currently, just under 20 percent do. https://t.co/qRcvrLji7z
— Declan Harty (@declanharty) December 18, 2023
Freed or Too Much Risk?
Consumer advocates have raised concerns that allowing too many people access to complex and risky private investments may lead to issues down the line. Private markets tend to be much less transparent than public markets, making it harder for average investors to conduct proper due diligence.
–Finance Magnates
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