President Donald Trump signed an executive order in August 2025 that allows 401(k) investors to access alternative assets for better returns and diversification. This includes private equity, crypto, real estate, private credit and commodities.
While that’s a good thing, it raises a fair question: should regular savers consider these options or stick with traditional investments?
To make an informed decision, here are the pros and cons of adding alternative investments to a retirement plan.
Pros of Alternative Assets
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High return potential: Historically, alternative assets tend to outperform traditional investments. For example, private equity invests in companies that aren’t publicly traded and these businesses can grow rapidly before going public. Crypto, on the other hand, has shown the ability to deliver outsized gains in relatively short periods. However, it’s important to note that past performance doesn’t guarantee future success.
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Diversification: Alternative assets don’t move along with traditional markets. When public equities plummet, these investments might hold steady since they’re not subject to daily market panic. This non-correlation can smooth out portfolio volatility over time.
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Access to institutional-level growth opportunities: Private equity, for instance, invests in companies years before they go public. That means you gain early access to investment assets that were previously reserved for institutional investors.
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Tax-deferred growth: Some alternative assets trigger taxes in taxable brokerage, which means they’ll grow tax-free, potentially increasing after-tax returns.
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Cons of Alternative Assets
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Higher fees: These investments often come with management and performance fees that are much higher than those of traditional investments, according to J.P. Morgan. It’s important to weigh the fees against the expected returns to make sure these assets are actually worth considering.
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Liquidity lockup: Adding such assets to your retirement plan means your money is tied up for years. You can’t quickly access it in case of emergencies. And the fact that retirement accounts already have withdrawal restrictions, which may lead to penalties.
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Complexity and risk: Before jumping into alternative assets, remember that these investments require complex due diligence and continuous monitoring that many investors may not have. Plus, you’re often trusting fund managers.
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Volatility: Alternative investments can experience dramatic value swings, which makes portfolio tracking way more difficult.
Should You Consider Alternative Assets in Your Retirement Plans?
Alternative investments like private equity and crypto aren’t for everyone. They work best when you have a long time horizon; think 10 or more years. If you’re planning to tap into your retirement account within five or 10 years, alternative assets may not be a great fit because of the liquidity lockup.
They’re also generally better suited for investors with more capital to spread across different asset types without overexposing themselves to higher-risk investments. For everyday savers, even a modest allocation to alternative investments can take up a disproportionate share of the portfolio.
Another thing to consider is complexity. Choosing alternative investments isn’t like picking a low-cost index fund. There’s no simple comparison based on expense ratios or historical performances. Instead, you need to evaluate things like investment strategy, management experience, fee structures and operational risks. That level of analysis takes time and financial knowledge that you may not have.
Ultimately, if you’re considering alternative assets, it’s best to work with a financial advisor. They’ll help you determine whether such investments align with your retirement strategy.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: Pros and Cons: Should Everyday Savers Consider Private Equity or Crypto in Retirement Plans?