00:00 Speaker A
President Trump expected to sign an executive order that opens the door for retirement savers to invest in alternative assets like crypto and private equity within their 401k plans. Private assets have not typically been in 401ks due to some of the risks associated with the investment, such as higher fees, lack of transparency, and long lock-up periods. But backers of the plan say private assets offer diversification and the chance for high returns over time. Joining us now with more is Yahoo Finance Senior Columnist, Carrie Hannon. Carrie, what are experts telling you about just the opportunity for one of us to be able to do this in our 401k? Are they saying Bitcoin full 100% 401k? Or how are we sort of thinking about it?
01:28 Carrie Hannon
Yeah, Josh. The word is caution, caution, caution. I think there is, you know, this is coming at people sort of fast, the concept. Uh, these have been in pension funds for years. It’s not a whole new thing. It’s just that plan administrators aren’t sure how to incorporate them in the 401k plans. And so we don’t actually know what this is going to look like. According to the experts I talked to, they’re like, we don’t know. Are they going to be part of a mutual fund that people invest in or are they a separate entity so you’re very clearly identified that these are, you know, these private assets? And so, it’s unclear. And I, they all sort of said to me, you know, there are different flavors. There’s all kinds of flavors. They all are going to carry different risks with them. And so, it’s something that the lay investor probably is not going to understand. The big concern is if you put these out there without really some education for individual, the normal, the average investor’s not going to understand what you just mentioned, the liquidity. They’re harder to get out of that. They have, yes, potential to juice up returns. So there is that positive, but these tend to be, um, come with fees that make it, um, a difficult investment for someone, and particularly if you’re short term, you’re nearing retirement or something. If you have a long horizon, it could be what one expert I spoke to today said, okay, so if you think you get it, you understand it, you want a little bit, you know, stay in the five to 10% range of your retirement portfolio. You don’t want to go crazy on this stuff because what happens is the fees, which we all talk about a lot, the fees cut your ultimate returns. And that’s what the retirement investor is looking for: returns so that they can accumulate money for the retirement. So fees are extraordinarily important. So we need to figure out how this is going to, how this is going to show up in the retirement accounts. But I’ll tell you what, it is going to. So, the path has started.