If you want to invest like the ultra rich, you need to start thinking outside the box. Investment crowdfunding in hedge funds can be one way to do that.
For most of us, investing is boring. It?s mostly boring for me, since I am relatively young and in the accumulation phase of my retirement nest egg. This means that, with the exception of my participation in the Grow Your Dough 2.0 challenge, I?m mostly indexing.
But that doesn?t mean I?ll always be indexing for the long term. At some point, as I continue to build wealth and as look for smart ways to grow my business and my brand, I?ll have more money available to invest. While I don?t want to risk my nest egg, I can see a point in time when I will want to invest like the ultra rich, and branch out a bit. At some point, hedge funds are likely to be on my list.
However, even when I reach a higher net worth, there is a good chance that I won?t have the kind of capital needed to invest in a ?traditional? manner in hedge funds. There?s a reason that hedge funds and private equity funds are considered favorites of the ultra rich: you usually need at least $5 million to participate.
Thanks to securities crowdfunding, though, it no longer has to be that way. If you are in the ranks of the so-called ?mass affluent? (meaning you can get your hands on $20,000 in capital for investments), you now have options if you want to invest like the ultra rich.
How Investment Crowdfunding Lets You Invest Like the Ultra Rich
Not too long ago, Congress passed the Jumpstart Our Business Startups Act. Among other things, this act is designed to allow for securities crowdfunding. Investment crowdfunding is a way for investors to take advantage of the interest in crowdsourced funding to actually invest. In the past, crowdfunding has been more about ?gifts? to startups via platforms like Kickstarter and Indiegogo. Investment crowdfunding is poised to change everything about how we go about investing.
Whether it?s investing in lucrative real estate, getting involved with venture capital, or investing in hedge funds, it will soon be possible for the mass affluent to invest like the ultra rich. Since investment crowdfunding has become allowed, platforms like Sliced Investing have been providing a way for accredited investors to take advantage of opportunities. Many of these investors have $20,000 to $100,000 available for alternative investments. However, many of the opportunities — like angel investing and hedge funds — require millions in capital. Investment crowdfunding bridges the gap, allowing more people access to opportunities to invest like the ultra rich without needing the millions in capital.
It?s important to note that you can only participate in investment crowdfunding if you are an accredited investor. This means that you need a net worth of at least $1 million (without including the value of your primary residence), or you need to have made $300,000 as a married couple each year for the last two years ($200,000 if you are single). This is something that I can aspire to. It?s not inconceivable that my husband and I could reach accredited investor status in the coming years, and that means that we could think outside the box with our investments. Many considered ultra rich invest in hedge funds, commodities, business, and high-end real estate. However, even some millionaires would be hard-pressed to meet the required minimums for these types of investments.
Investment crowdfunding changes all of that. In 2013 there were 9.63 millionaires in the United States. Now, these folks have access to opportunities to invest like the ultra rich. With a smaller chunk of capital, it?s possible to invest in hedge funds, and reap the potential benefits. Hedge funds come with a number of investment advantages, and now you don?t need millions of spare dollars to join in. For some of us, $20,000 seems like a lot right now (I couldn?t do it), but it?s still a doable goal in the next few years. I can see myself able to continue building my retirement nest egg through boring means while using other money to ?play? around a little bit with alternative investments.
Thanks to investment crowdfunding, hedge funds and other opportunities are more likely to be realities for more of us.
Disclosure: This blog post was written for Sliced Investing pursuant to a paid content arrangement I have with the company?s representatives as part of an effort to raise awareness about alternative investment options.