Craig Wear, a CFP, breaks down a new executive order that could let 401(k)s hold private assets like hedge funds, crypto, and real estate. The upside: better diversification and higher returns. The downside: higher fees, less liquidity, and more risk. His advice: use a fiduciary advisor to navigate it carefully.
So Trump just changed what you can invest in through your 401k. Some people think 401ks are boring. Just stocks, bonds, target date funds. But a new executive order could open the door to private assets like hedge funds, private credit, real estate, investment trust, venture capital, even cryptocurrency. So what's the upside? Well, more diversification beyond just the stock market is one access to maybe investment that were once only for the ultra wealthy. And there's also potential for higher returns and protection against inflation. But there is a downside, and that is higher fees than index funds or ETFs. You got less liquidity in some of these partnerships or venture capital things and your money could be locked up for years. More risk if there's low quality investment options. Flood the market because this new law has been passed. But at first glance, it sounds risky to mix private equity or Bitcoin with your retirement. But. But here's the flip. If it's used carefully, the options could add years of extra income in retirement and help shield you from market downturns. What's the key to the whole thing? Work with a fiduciary who understands these investments and can keep your risk balanced.
