Trump’s executive order might bring private equity, crypto & real estate to your 401(k) — but will that be a boon or spell doom for your nest egg?

Significantly, this is not a change in policy, but it signals strong White House support for allowing riskier investment options in Americans' retirement plans.

Would alternative assets help or hurt?

There are several positives to this change that could unlock new opportunities for retirement savers. However, everyday investors may want to proceed cautiously, or at least do thorough due diligence.

Pros

Supporters argue that diversifying with private equity, real estate, and cryptocurrency could improve portfolio diversification and long-term growth.

For example, Vanguard estimates that private equity could generate annual returns around 9%, outperforming typical public-market funds.

Access to traditionally exclusive investments may also expand. Firms like BlackRock, Apollo, and KKR have historically limited private assets to institutional or high-net-worth investors. Now, platforms like Empower are preparing to offer them through target-date funds in retirement plans.

The order may accelerate the inclusion of crypto-based funds or ETFs in 401(k) investment menus.

Cons

There are inherently higher costs and lower returns associated with the alternative investments in question. For example, private equity firms often charge management fees around 2.5% annually, plus 20% of profits above a set threshold. By contrast, passive index funds recently averaged fees of just 0.11%.

These assets are also less liquid and harder to value. They often lack regular reporting and can be difficult to sell quickly. This potentially makes them riskier and less transparent, especially for everyday investors without the tools or experience to evaluate them.

There's also concern of fiduciary risk. Plan administrators are legally obligated to act in participants' best interests, including clearly communicating costs, risks, and unexpected returns.

Without clearer regulatory guidance, fiduciaries may be reluctant to include complex or high-cost options, due to potential legal exposure and a preference for simplicity.

So what are some key considerations for retirement investors?

1. Look for low fees & long-term performance

When choosing funds for your 401(k), prioritize those with a proven track record over the long haul — typically measured in five- and 10-year periods.

Short-term performance can be misleading, while long-term results show how a fund has performed across various market conditions. Just as important are fees: high expense ratios can steadily eat away at returns, so aim for low-cost options whenever possible.

2. Increase stability and lower risk by diversifying

A well-diversified portfolio — typically a mix of stocks and bonds — can help smooth out the market’s inevitable ups and downs. Target-date and broad-based mutual funds often offer this balance automatically, adjusting the asset mix as you approach retirement.