New rules are expanding what Americans can hold in their 401(k)s and other tax-advantaged retirement accounts.
An executive order signed by President Donald Trump has opened the door for certain “alternative assets” — like private credit, private equity, and even cryptocurrencies — to be included in their portfolios. [1]
Proponents say this shift “democratizes” 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.
Here’s why America’s retirement landscape is changing — and how to protect your own portfolio from unnecessary risk.
Traditionally, alternative assets — such as private equity and hedge funds — were restricted to so-called “accredited investors” 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]
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]
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.
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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.
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 — plus 20% or more in performance fees, according to Hamilton Lane. [5]
Unlike public markets, private assets lack a deep secondary market, making it difficult to exit investments. “If there’s a desire to pull out of private equity, there isn’t a way to actually sell that company or sell shares — there’s just no market for it,” said Charles Rotblut, vice president of the American Association of Individual Investors, in an interview with CNBC. [6]
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 “systemic risk machine,” increasing the likelihood of financial instability in future downturns. [7]
For most investors, sticking with low-cost index funds remains a sound strategy.
However, if you’re keen on exploring private assets, consult a financial advisor to ensure they fit within your overall financial plan.
Lisa Kirchenbauer, founding partner and senior advisor at Omega Wealth Management, told NPR a sensible approach is to allocate a small portion — around 5% to 10% — of your portfolio to these asset classes. [8]
This allows you to pursue diversification benefits while limiting potential risks to your retirement savings.
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[1]. The White House “Democratizing Access To Alternative Assets For 401(K) Investors.”
[2]. U.S. Securities and Exchange Commission (SEC) “‘Accredited Investor’ Net Worth Standard.”
[3]. Opinium “Retail investors need trust to bet on alts, survey shows.”
[4]. Morningstar “How Attractive Is Private Equity?”
[5]. Hamilton Lane Evaluating Private Equity Fee Structures.”
[6]. CNBC “Trump just signed an executive order that brings new investment options to 401(k)s — what it means for your money.”
[7]. Institute for Economic Policy Research (SIEPR) “The democratization of private equity could create a ‘systemic risk machine.’”
[8]. Omega Wealth Management “Private equity and crypto could be heading for your 401(k). Here’s what to know.’”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
