A qualified investor is Meaning of the concept, definition criteria

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

There are 2 ways to get income: work for money and make money work for you. More and more people choose the second option. However, not every one of them can be called an investor. So who is a qualified investor? Who is an investor in general and what is investing? Usually people make the mistake of thinking they know the answers to these questions.

What is investing?

Let's imagine that you opened an account with a Forex broker, replenished it with 300,000 rubles and decided to make money on the difference in exchange rates. Will such an investment be an investment?

This will be speculation at best. At worst, gambling. But in both cases, this will have nothing to do with investing.

Let's imagine a different situation. You heard on TV that Gazprom's shares have been growing over the past 3 years. You immediately take your 300,000 rubles and open an account with a broker. The next day afterbefore you bought the shares, Alexey Miller announced a global layoff. And the company's shares soared 3%. You immediately sold them and made a profit - almost 1000% per annum.

But will it be an investment? And again no. This is just an example of successful speculation.

How to do it right?

So what is investing? This is the plan. In Rich Dad's Guide to Investing, Robert Kiyosaki compares investing to traveling.

The first thing you do is start planning your "route". You know point A, your current situation. You also know point B - your financial future, as you would like it to be. Now you need to somehow get from point A to point B. What do you use to do this? Decide to save a certain amount for a deposit? Buy stocks or mutual funds? Focus on investing in real estate?

Important: there is no "good" and "bad" transport. Its task is to get you from point A to point B. Use the "transport" that will be the most efficient at the current time.

You can't use a steamboat to get around on land. Similarly, stocks will not work for you if your investment horizon is less than 5 years - it would be inefficient and risky - like traveling overland on a steamboat.

Investing step by step

Accordingly, to invest, you need:

• determine point A - draw up a financial report;
• define point B - set goals;
• choose "transport" andthink over a “route” from point A to point B.

That's what investing is - just following a plan to get from A to B. Robert Kiyosaki called it "a mechanical and boring process of almost guaranteed enrichment." The problem is that it is too mechanical and boring. However, this is the path of a true investor.

Most of them come to the market without a plan and understanding of the work of certain tools, just to tickle their nerves. They get into the "bus" and hope to cross the ocean on it. Then they jump into the “airplane”, despite the fact that heavy cloud cover is announced. And then they try to attach wheels to the "leaky boat" in order to move on land.

It's like a casino - you can have fun, but you can not earn, at least in the long run.

Who is an investor?

It is clear that this is a person who makes investments. Here the question is different - how and why does he do it? Why can't you just earn more - why should you invest? And what is the difference between investment and speculation?

Few people thought about it, but there are 3 types of income: earned, passive and portfolio. Most often, people deal with the first of them - earned. He helps them not to die of hunger. And passive and portfolio income give we alth.

So, an investor is a person who turns his earned income into passive or portfolio income. That is what his plan is for. Investorbuys never to sell.

A speculator is a person who tries to buy low and sell high. This is his work, and its result is earned income. This is not what an investor is looking for.

So what is the difference between these types of income? In the first option, you work for money, in the others, money works for you.

Examples of 3 types of income: Earned

Almost everyone is familiar with earned income. This is a salary, income from professional activities or from a business. The doctor receives a salary, the lawyer receives money for the consultation, and the owner of the company receives income from its activities.

The main difference between this income and the rest is that a person has to work to receive it. And not only in the enterprise. Providing services, managing other people's capital in the stock market, doing business - all these are different types of work. A person exchanges his labor for money or other values.

Passive and portfolio income

But 2 other types of income are not so common. Nevertheless, it is possible to cite well-known examples of such income. Monthly interest on a bank deposit is passive income. To some extent, pensions can also be attributed here.

Here are not so common examples of passive income: shareholders of the company receive annual dividends on shares, the franchise owner receives passive income in the form of roy alties - a monthly deduction for the right to use the brand. Rental income is another example of passive income.

Passive income is regularpayments received from cash-generating assets. This could be intellectual property, real estate or other assets.

What is portfolio income? This includes profit from the difference in the market value of securities - stocks or bonds. This type of income can be obtained by giving your money into trust management, acquiring mutual fund shares or investing money in the stock market yourself.

The following example will help you better understand the difference between portfolio income and earned income. Imagine that the fund manager multiplied your money by 2 times. For you, this is portfolio income - after all, you did not have to work for this yourself. But the commissions you paid are the manager's earned income.

Who is a qualified investor?

As far as the law is concerned, this is an investor who satisfies any of the following conditions:

• invested more than 6 million rubles of personal funds in securities or their derivatives;
• worked in an investment fund for at least 2 years, if this fund itself is recognized as a qualified investor, then at least 3 years - otherwise;
• concluded transactions for a total amount exceeding 6 million rubles with securities or their derivatives over the past year, with an average of 10 per quarter and at least 1 for the last month;
• has assets of 6 million rubles or more, and only cash in bank accounts, certificates for precious metals and securities are taken into account.

Also qualifiedas an investor, the requirements of the law recognize a person who has received higher education in economics at a state educational institution and has passed certification as a professional participant in the securities market, or has received one of 3 international certificates: CFA, CIIA or FRM.

A legal entity can also obtain the status of a qualified investor. However, the requirements will be more stringent. Here it is also enough to fulfill any of the conditions:

• capital is 200 million rubles or more;
• every quarter there are 5 or more transactions with securities, and their total value is more than 3 million rubles;
• 1 billion rubles in revenue in the reporting period;
• assets worth 2 billion rubles.

By law, that's enough. However, is it really possible to call a person or a company a qualified investor only on the basis of these data? This is not true. Let me offer an alternative point of view on this issue.

Is this really a qualified investor?

A person can earn 6 million rubles. Buy shares on them. But does that make him a qualified investor? Legally, yes. The government believes that a person who has earned such a sum is able to take care of himself, so he does not need to be protected from "risky" investments - in securities for qualified investors.

But is it really so? A competent investment plan, his experience and skills in managing financial instruments speak much more about the qualifications of an investor than the presencehe has money. Although a qualified investor will also have money.

Alternative opinion: what is a qualified investor?

Below is an alternative list of conditions for recognizing an investor as qualified (all items must be met). So, qualified investors are those who:

• knows the difference between assets and liabilities;
• clearly follows the plan, but is always ready to adjust it according to the situation;
• converts earned income into passive and portfolio income;
• knows the difference between fundamental and technical analysis, successfully applies both in practice;
• ready for any event in the market, rather than waiting for these events with hope;
• owns the appropriate terminology;
• understood not only investment instruments and procedures, but also securities laws, and uses civil and tax codes to his advantage, reducing costs;
• uses a team: brokers, advisors and consultants, but does not rely on them alone - the responsibility for the decisions made always remains with him;
• strive for simplicity – able to explain the essence of each of his investments to a six-year-old child in 10 minutes.

How to become a qualified investor?

This question was best answered by Robert Kiyosaki in his book Rich Dad's Guide to Investing. In his opinion, you need 3 things to become a qualified investor. This is:

• skills -there are 2 ways: get a financial education, study investment tools and procedures or hire a consultant, but in this case, you will have to get basic knowledge and skills - you must communicate with a specialist in the same language;
• experience - get an education "on the street", you can't learn to ride a bike by reading books;
• excess money - come by themselves, with experience and skills.

Summarize

Warren Buffett, the No. 1 fundamental investor in the world, and Robert Kiyosaki, a brilliant marketer, businessman and investor with 40 years of experience, adhere to a similar alternative.

According to Robert Kiyosaki, a qualified investor has controls that help him reduce risk to a minimum.

A person who does not meet these requirements, but has 6 million rubles, enters the market more as a player than as an investor. Perhaps he would have had a better chance of winning at the casino.