The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: solon on September 25, 2018, 10:08:41 AM
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If you want to invest in private securities, hedge funds, etc, you have to be an "accredited investor". This means you have a networth of $1,000,000 or more, or an annual salary of $200,000 or more. But some argue being rich doesn't make you smart, and the problem is that you need to be smart.
Here's a guy who proposes a better way to vet investors. https://www.bloomberg.com/view/articles/2018-09-24/earning-the-right-to-get-swindled
- Anyone can invest all they want in a diversified portfolio of approved investments (non-penny-stock public companies, mutual funds and exchange-traded funds with modest fees, insured bank accounts, etc.).
- Anyone can also invest in any other dumb investment; you just have to go to the local office of the SEC and get a Certificate of Dumb Investment. (Anyone who sells dumb non-approved investments without requiring this certificate from buyers goes to prison.)
- To get that certificate, you sign a form. The form is one page with a lot of white space. It says in very large letters: “I want to buy a dumb investment. I understand that the person selling it will almost certainly steal all my money, and that I would almost certainly be better off just buying index funds, but I want to do this dumb thing anyway. I agree that I will never, under any circumstances, complain to anyone when this investment inevitably goes wrong. I understand that violating this agreement is a felony.”
- Then you take the form to an SEC employee, who slaps you hard across the face and says “really???” And if you reply “yes really” then she gives you the certificate.
- Then you bring the certificate to the seller and you can buy whatever dumb thing he is selling.
- If an article ever appears in the Wall Street Journal in which you (or your lawyer) are quoted saying that you were just a simple dentist, didn’t understand what you were buying and were swindled by the seller’s flashy sales pitch, then you go to prison.
I just thought is was really funny. But if you want to have an actual accredited investor discussion, that's fine too.
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I think they tried the same thing with cigarettes. I'm not sure it works.
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I'd qualify on paper. In reality I wouldn't have a clue. I'll stick with VTSAX and the like.