Trump wants your 401(k) to access crypto and private equity. Here’s what to know.

President Trump recently signed an executive order aimed at democratizing retirement by allowing 401(k)s to invest in alternative investments, such as private equity and cryptocurrencies. This move has the potential to shake up the traditional investment options offered in retirement plans, potentially providing higher returns and protection from market volatility. However, experts caution that there are risks and caveats to consider when venturing into these alternative asset classes.

The executive order directs the Labor Department to redefine qualified assets under 401(k) retirement rules, potentially opening the door for Americans to invest in a wider range of assets beyond stocks and bonds. While workers will still have the option to stick with traditional investments, the inclusion of alternative strategies could offer diversification and potentially higher returns.

It’s unclear when these changes will become effective, as it will take time for major retirement plan companies to develop appropriate funds and for employers to revise their retirement plan options. Adoption of alternative investments may be slow due to factors such as cost, transparency, and complexity, according to analysts.

Alternative investments like private equity and cryptocurrencies come with their own set of risks. Private equity investments, for example, lack daily pricing and transparency, while cryptocurrencies are known for their extreme volatility. While these assets have the potential to outperform stocks and bonds, there are no guarantees, and higher costs associated with alternative investments can eat into returns.

In terms of performance, alternative investments have shown the potential for outsized gains. For example, private equity investments have outperformed stocks and bonds over a 10-year period, according to a recent study. However, investors should be mindful of the higher costs associated with these investments, which are typically passed on to fund investors.

Overall, the inclusion of alternative investments in 401(k) plans could offer new opportunities for savers looking to diversify their retirement portfolios. However, it’s important for investors to carefully consider the risks and potential rewards before venturing into these higher-risk asset classes. As the retirement landscape evolves, it will be interesting to see how these changes impact the way Americans save for their future.