TEXAS — Options like cryptocurrency, real estate and private equity may soon be on the menu for American workers planning for their retirement.
Last month, President Donald Trump signed an executive order aimed at “democratizing access to alternative assets for 401k investors.” The order directs federal agencies to reduce and remove barriers currently in place to allow those alternative options and private equities within company-sponsored 401k and other retirement accounts.
So, potentially, workers could open their company’s 401k plan options and find, in addition to the “target date plans” and ETFs, that they could put some of their nest egg into options like crypto or private investments.
That prospect will likely be a bit confusing for many, but the options that will sound new to some are going to be very familiar to a lot of the youngest investors who are just getting their retirements started.
“Oh yeah,” said graduate student Jakob Beschel with a smile. “People ask, ‘Do you invest in crypto?’”
Beschel and fellow finance student Kaustubha Pokharel lead the University of North Texas’s Student Investment Group — where they manage more than a million dollars in real-life securities to help them and their fellow students learn the art of finance.
“Every semester we have about 100 applicants, and, like, we take 10 people,” said Pokharel.
Leading a group like that, the duo said they, understandably, get a lot of questions from friends and fellow students about how to invest and how to make money in the markets. They say a lot of those questions inevitably go to investments like cryptocurrency, which has become a favorite of many young traders due to frequent stories on social media and beyond of people hitting it big with Bitcoin and the like.
“I think our generation is more concerned with the fear of missing out,” said Pokharel. “They just go and watch one YouTube video and they’re like, ‘Okay, this is what I should do.’”
For their money, and their investment group’s, Pokharel and Beschel said they avoid crypto, preferring less volatile, more traditional investments, but they say they get the appeal of the stuff among their generation.
A lot of the experts already in the field get it too.
“The themes of how they invest differ greatly compared to their older peers,” said Sam Bourgi, Finance Analyst for Investor’s Observer.
Bourgi, too, has watched the President’s executive order closely and said it will likely be especially attractive to younger workers just starting their 401ks. After all, many of them already have some exposure to alternative investments like cryptocurrency and likely understand the swings and risks better.
“There are people now who are looking for different ways to generate long-term wealth, especially with real estate becoming increasingly out of reach,” he said.
For those folks, and especially those with significant time before retirement, Bourgi said these new alternatives may be something to consider and could bring some big growth and profit by the time those folks retire.
However, the reason many retirement savings facilitators have avoided some of these alternative options in the past is that they can be risky.
“Huge potential returns, but the volatility can leave your stomach churning,” Bourgi put it bluntly.
Pokharel and Beschel have seen that clearly in their studies of the financial system. They’ve watched people lose large amounts of money because they went all-in on a cryptocurrency right before an unexpected swing down, only to be ignored by many as someone else banks big on a swing up.
“You look at the fabulous stories and see people make millions of bucks, but again, you don’t see the people that lost millions of bucks,” said Beschel.
And that’s from trades using everyday funds or even money that some go in expecting to lose. With this change though, we’re talking about people’s life savings; the money they’ll one day rely on when they retire.
If and when any changes go through, many financial experts are urging workers to be cautious and talk to a financial expert, ideally a fiduciary, before making any drastic changes with their retirement money.
