401k Investing for Newbies and Nerds
There are one hundred and thirty million American workers who collectively own $35 trillion in their 401k and related retirement accounts. The owners of these accounts face both challenges and opportunities. The largest opportunity is that their accounts are investment accounts, not savings accounts, and for the past three decades they have grown in the low double-digit range.
The main challenge 401k owners face is that there are required to make their own investment decisions by choosing from a limited menu of mutual funds.
These 130 million self-directed retirement account owners can be divided into 3 distinct categories. The first are those who could care less about their money and are willing to just let nature take its course. The second group, NEWBIES, are inexperienced in the investment process, but are willing to become engaged in the management of their hard earned dollars. The third group, NERDS, are those who have a modicum of investment expertise and are willing to devote the time and energy to expand their investments skills.
The mission of my podcast is to motivate and educate 401k NEWBIES and NERDS on how to optimize their 401k experience. I have a 62-year relationship with the stock market. I have been a stockbroker, finance professor and individual investor. Ten years ago, I appointed myself to the position of 401k guru extraordinaire. I have no investment products to sell. All I have to offer are the objective observations of one who has been there and done that.
401k Investing for Newbies and Nerds
Season 2 Episode 5 New Menu Items Coming to a 401k Near You
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In August of 2025, President Trump sign an executive order directing the Department of Labor to investigate how to include private equity and cryptocurrency on the investment menu of the nation’s 75,432 401k plans. There are a number of significant obstacles to this directive. The first biggie is how to do 401k plan participants get access to these non-exchange traded alternative investments?
The second significant obstacle to Trump’s plan is the Supreme Court’s Tibble vs Edison decision which ruled that employers must provide their 401k employees with reasonable priced mutual funds or compensate them for their losses. What followed was a decade of lawsuits the lined the coffer of the plaintiffs’ lawyers and resulted in a push to include low-cost index funds in every 401k menu.
This week, Trump’s quest to included alternate investments in all the nations 401k plans reached lift off status when the WSJ carried an op ed piece written by the Secretary of Labor. She declared that her department was moving ahead with regulations that would allow the inclusion of alternative investments in 401k mutual fund menus and they were carving out regulations that would protect employers from lawsuits involving excessive fees restrictions set forth in the Tibble vs Edison decision.
In this episode of my podcast, I will provide further details on this issue, beginning with a brief history of how we got to this point. I will also examine how the financial service industry could manufacture products that allow 401k investors access to “alternative investments.”
I will conclude with my thoughts on how newbies and nerds should react to this developing situation.