Should Private Assets, Gold, and Crypto Be Investment Options in 401k and other Defined Contribution Plans? - Money For the Rest of Us Recap

Podcast: Money For the Rest of Us

Published: 2025-07-23

Duration: 20 min

Summary

David Stein questions the inclusion of private assets, gold, and crypto in 401k plans, arguing that most investors lack the financial literacy to understand these options, which are best left to diversified target date funds.

What Happened

David Stein examines the potential executive order by President Trump to include private market investments in U.S. defined contribution plans, including private equity, gold, and cryptocurrency. He highlights the $12.4 trillion at stake in U.S. defined contribution plans, with over $9 trillion in 401k plans, and discusses Intel's 2015 lawsuit over including private equity in its plan. Despite the favorable court ruling for Intel, companies remain worried about potential lawsuits.

Stein argues that while private equity can diversify portfolios, it should only be included in target date funds due to its illiquidity. He shares his personal experience with private capital investments, describing how funds can remain locked for over a decade, which is not ideal for most 401k investors who are not accustomed to such illiquidity.

The episode touches on the lack of financial literacy among 401k participants, with many unable to understand basic investment concepts like compounding interest and inflation. Stein suggests that investing in private capital should require more effort and understanding, as these are complex and less liquid assets. He notes that target date funds, which are professionally managed, can include private equity as they are designed to be diversified.

Stein warns against the fear of missing out and the lottery mentality driving investments in speculative assets like Bitcoin and gold. He questions whether price appreciation in these assets is due to sound investment theses or speculative behavior.

He emphasizes that 401k plans should not lower barriers for complicated assets like crypto and gold, as these should be pursued outside of retirement plans if individuals are truly interested and understand them.

Stein also critiques the current environment for private equity, noting that the market is facing an illiquidity crunch, with vast amounts of capital tied up and difficulties in fundraising. He speculates that the push to include private equity in 401k plans may be driven by private capital funds seeking liquidity.

The episode ends with Stein expressing skepticism about the inclusion of complex investment options in 401k plans due to the risks and lack of understanding among plan participants, advocating for maintaining some barriers to such investments.

Key Insights