New rules are expanding what Americans can hold in their 401(k)s and other tax-advantaged retirement accounts.<\/p>\n
An executive order signed by President Donald Trump has opened the door for certain \u201calternative assets\u201d \u2014 like private credit, private equity, and even cryptocurrencies \u2014 to be included in their portfolios. [1]<\/p>\n
Proponents say this shift \u201cdemocratizes\u201d access to investment opportunities traditionally reserved for institutions and the wealthy. Critics, however, warn that these assets carry complex risks that may not be properly understood by the average investor.<\/p>\n
Here\u2019s why America\u2019s retirement landscape is changing \u2014 and how to protect your own portfolio from unnecessary risk.<\/p>\n
Traditionally, alternative assets \u2014 such as private equity and hedge funds \u2014 were restricted to so-called “accredited investors\u201d who either had a net worth of more than $1 million (excluding their primary residence) or annual income exceeding $200,000, according to the U.S. Securities and Exchange Commission (SEC). [2]<\/p>\n
However, retail investors have shown growing interest in recent years. A survey by market research firm Opinium found that 21% of retail investors have considered alternative assets, and another 5% plan to invest in them. [3]<\/p>\n
The most common reason cited was diversification. Many investors are seeking to move beyond traditional stocks and bonds in pursuit of higher returns. However, experts caution that alternative assets can carry complex and less transparent risks that may not be suitable for all investors.<\/p>\n
Read more: There’s still a 35% chance of a recession hitting the American economy this year \u2014 protect your retirement savings with these 10 essential money moves ASAP<\/a><\/strong><\/p>\n Private market funds often advertise higher return potential than traditional stocks and bonds. But in practice, those lofty targets can obscure high fees, limited liquidity, and inconsistent performance.<\/p>\n As of May 2025, only two of the 14 private equity and venture capital funds tracked by Morningstar had outperformed the S&P 500 since inception. [4] Meanwhile, typical private equity fees include 1% to 2.5% in annual management fees \u2014 plus 20% or more in performance fees, according to Hamilton Lane. [5]<\/p>\n Story Continues <\/p>\n Unlike public markets, private assets lack a deep secondary market, making it difficult to exit investments. \u201cIf there\u2019s a desire to pull out of private equity, there isn\u2019t a way to actually sell that company or sell shares \u2014 there\u2019s just no market for it,\u201d said Charles Rotblut, vice president of the American Association of Individual Investors, in an interview with CNBC. [6]<\/p>\n The risks extend beyond individual portfolios. A report from the Institute for Economic Policy Research (SIEPR) warned that broad retail access to illiquid and opaque assets could create a \u201csystemic risk machine,\u201d increasing the likelihood of financial instability in future downturns. [7]<\/p>\n For most investors, sticking with low-cost index funds remains a sound strategy.<\/p>\n However, if you\u2019re keen on exploring private assets, consult a financial advisor to ensure they fit within your overall financial plan.<\/p>\n Lisa Kirchenbauer, founding partner and senior advisor at Omega Wealth Management, told NPR a sensible approach is to allocate a small portion \u2014 around 5% to 10% \u2014 of your portfolio to these asset classes. [8]<\/p>\n This allows you to pursue diversification benefits while limiting potential risks to your retirement savings.<\/p>\n Join 200,000+ readers and get Moneywise\u2019s best stories and exclusive interviews first \u2014 clear insights curated and delivered weekly. Subscribe now.<\/a><\/strong><\/p>\n At Moneywise, we consider it our responsibility to produce accurate and trustworthy content people can rely on to inform their financial decisions. We rely on vetted sources such as government data, financial records and expert interviews and highlight credible third-party reporting when appropriate. We are committed to transparency and accountability, correcting errors openly and adhering to the best practices of the journalism industry. For more details, see our editorial ethics and guidelines<\/a>.<\/p>\n [1]. The White House<\/a> \u201cDemocratizing Access To Alternative Assets For 401(K) Investors.\u201d<\/p>\n [2]. U.S. Securities and Exchange Commission (SEC)<\/a> \u201c\u2018Accredited Investor\u2019 Net Worth Standard.\u201d<\/p>\n [3]. Opinium<\/a> \u201cRetail investors need trust to bet on alts, survey shows.\u201d<\/p>\n [4]. Morningstar<\/a> \u201cHow Attractive Is Private Equity?\u201d<\/p>\n [5]. Hamilton Lane<\/a> Evaluating Private Equity Fee Structures.\u201d<\/p>\n [6]. CNBC<\/a> \u201cTrump just signed an executive order that brings new investment options to 401(k)s \u2014 what it means for your money.\u201d<\/p>\n