I don’t have to worry about this anymore. No more 401K. Rolled them over to IRAs. But…
This seems like a bad idea. 1poorkid flagged me about this, and she’s concerned about her 401K. She showed me an article that cited Enron as an example of Enron stock dominating their 401Ks (which became worthless, as we know).
Just posting this for discussion. I’ll ask somewhere else if this is even legal (i.e. can the Felon just executive order that?). I know Elizabeth Warren is against this, and she’s a strong advocate for consumer and investor protections.
That is a crazy idea. Worse than the Spac one we went through. I suspect they want to have access to personal accounts without the oversight of the SEC.
I also would have liked more options in my 401K. I’m also a bit more investment-savvy than the average worker (as I’m sure you are also). I worked with people who didn’t understand that our company ESPP was a guaranteed 15% return (minimum) if they sold the same day as the purchase. They thought it was better in their checking accounts. They were overwhelmed by the limited choices in our 401K because they had no clue (and many didn’t participate at all as a result). If you’re not familiar with MFs, a lot of the Fido funds available to us were “mumbo-jumbo” in their descriptions.**
Someone like you or I (or pretty much anyone reading this) would be able to sort through it. Not everyone can, but they still deserve to be able to participate with a reasonable expectation of low risk.
A lot of the folks at Enron probably didn’t understand what risk they were taking, and their 401Ks were wiped out as a result (from what I know of the situation).
It’s a mistake to think everyone is as sophisticated as you.
**When asked, I would recommend to them one of the “date funds” as a relatively safe, diverse and balanced approach (e.g. the 2030 fund). There were no index funds in our 401K plan, or probably would have suggested that, too.
The problem that I see is that private equity may become part of the ‘default option’, which makes it not that optional. Target date funds are often set up as the default option when participants don’t make an investment choice. At least one of the large target date fund providers - BlackRock - is adding private equity into their target date funds. For plans that have the BlackRock target date funds as their default, that means that participants could be forced into private equity by just not making a choice - which doesn’t seem optional.
That is the real issue - much more so than the small bit that might be in PE. The same issue was experienced in 2022 with anyone that was in a 2020 TDF as they had a high exposure to bonds that suffered their worst performance in 100 years.
Vanguards 2020 lost over 14%. Fidelity lost over 16%. It is fair to assume that PE would be a very small amount of 2020 fund.