New investment options may be coming to 401(k)s—here's what it means for your money

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Next Gen Stressed the stock market

And depending on who you ask, that may not be a good thing

Last month, the Labor Department rescinded Biden-era guidance that cautioned employers to take "extreme care" before making digital assets, such as cryptocurrencies, available in company plans

In and of itself, the crypto rollback is "not necessarily controversial," Philip Chao, a certified financial planner and retirement plan investment consultant, recently told CNBC. "In reality, it's saying we should treat crypto any other asset. "But it may be a signal to companies that they can begin offering crypto in workplace plans without consequence, he said

Similarly, President Donald Trump is reportedly considering an executive order that would direct federal agencies to explore allowing private equity investments — funds that invest in non-publicly traded es — into plans as well

Such a move would be a big win for the world's largest money managers, who stand to fit from expansion of access to an asset class that has historically been available only to wealthy investors

BlackRock CEO Larry Fink in particular has been an advocate for opening the doors to private equity, arguing in his most recent annual holder letter that "democratizing" private could vide market-beating long-term returns for American workers

But while these new investments can offer tantalizing returns, they also pose a major risk for long-term retirement rs, some investor advocates say. "The objective for the average person is to have a safe, secure retirement plan," says Jerry Schlichter, founding partner of Schlichter Bogard, a firm known for lawsuits on behalf of employees over excessive fees in 401(k) plans. "When you talk new areas cryptocurrency or private equity, these are fraught with danger for investors for a variety of reasons. "To be , Schlichter and other financial s don't deny these assets' potential to make investors money

They just may not be appriate for everyday investors' retirement accounts, they say. "It's a square peg in a round hole," Schlichter says

Under this framework, the argument against crypto's inclusion in workplace plans is

Although certain cryptocurrencies have dered impressive returns, the asset class hasn't been around long enough to have ven itself as a safe option for investors. "There's no long-term performance history for cryptocurrency, and the short- to intermediate-term has been all over the place," says Schlichter. "This is not the kind of investment that people want and deserve when they need to have something that's tected for their years in retirement. "The case against private equity is a little more complicated

As the name implies, private equity funds invest in a manner similar to mutual funds, but instead of holding s in publicly-traded companies, they hold stakes in firms that aren't yet on the market

It's not hard to imagine how investors in such funds can earn impressive returns

Just think how well you could have done if you owned a piece of Tesla or Nvidia before the firms went public

Fink says in his letter that pension funds, many of which invest in private equity, tend to outperform 401(k)s, but experts debate whether private funds actually outperform market indexes on a long-term basis. "There's nothing wrong with [nontraditional 401(k) investments], but you have to know what you own," says Sam Stovall, chief investment strategist at CFRA. "What is it that you're buying

What are your expectations for this investment

And if it goes through a slump, what are you going to do then. "For regular investors, who may not be familiar with how private equity works, there are a few key pitfalls to consider before buying

They're expensiveInvestment fees eat into returns you earn from them

And while private equity advocates argue that their returns are worth it, they have a very high hurdle to

Compare that with an index fund, which mirrors the return of the market while charging fractions of a percent in fees. "They're almost free these days," says Schlichter

If they own a stock or bond fund, that's generally an easy ask

Stocks or funds that you ostensibly own are sold and you get your cash

That's not so easy with private equity, which often has set holding periods and limits on how much investors can redeem. "If there's a desire to pull out of private equity, there isn't a way to actually sell that company or sell s — there's just no market for it," says Charles Rotblut, vice president of the American Association of Individual Investors

Or, Schlichter posits, such funds could choose to keep some cash on hand for redemptions, instead of it, which could dampen returns

They're tough to understandPrivate equity funds aren't as heavily regulated as exchange-traded funds and mutual funds and are therefore generally less transparent their investment strategies

That may leave everyday investors at sea as they try to understand complex strategies, which may include with leverage, trading derivatives or taking highly concentrated positions in

None of that is to say that, over a period of decades, a particular private equity fund won't outperform the market

But when it comes to your 401(k), the message is simple, says Schlichter: "If you don't understand the investment, you shouldn't depend on it for your retirement assets. "Are you ready to buy a house

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