More options may soon be coming to the menu of investments you can choose in your 401(k) plan. 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Last month, the Labor Department rescinded Biden-era guidance that cautioned employers to take “extreme care” before making digital assets, such as cryptocurrencies, available in company plans.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 like 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 businesses — into plans as well.

Such a move would be a big win for the world’s largest money managers, who stand to profit 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 shareholder letter that “democratizing” private markets could provide 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 savers, 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 about new areas like cryptocurrency or private equity, these are fraught with danger for investors for a variety of reasons.”

To be clear, Schlichter and other financial pros don’t deny these assets’ potential to make investors money. They just may not be appropriate for everyday investors’ retirement accounts, they say.

“It’s a square peg in a round hole,” Schlichter says.

Investing experts generally advise parking your core, long-term portfolio in a diversified mix of assets that have delivered proven, consistent returns over the long-term — decades, at least. Given the stock market’s historical upward trajectory, a broad stock market index mutual fund would fit the bill of an appropriate 401(k) investment option, Schlichter says.

Under this framework, the argument against crypto’s inclusion in workplace plans is clear. Although certain cryptocurrencies have delivered impressive returns, the asset class hasn’t been around long enough to have proven 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 protected 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 shares 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.

For now, investment in such funds is typically reserved for accredited investors — generally those with annual incomes above $200,000 or a net worth north of $1 million.

The argument from Fink and others is that opening 401(k) plans to these investments would allow everyday investors to get in on the same return potential that the only the wealthy currently enjoy. 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 expensive

Investment 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 clear. Under one popular model, a private equity fund may charge a 2% annual fee, plus 20% of the fund’s profits over a certain threshold.

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.

They’re illiquid

Let’s say a group of employees want to pull money out of their 401(k) plan. 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 shares — there’s just no market for it,” says Charles Rotblut, vice president of the American Association of Individual Investors.

That could mean that owners of private equity funds in 401(k)s could have trouble selling shares quickly, either to raise cash or to buy another investment. Or, Schlichter posits, such funds could choose to keep some cash on hand for redemptions, instead of investing it, which could dampen returns.

They’re tough to understand

Private equity funds aren’t as heavily regulated as exchange-traded funds and mutual funds and are therefore generally less transparent about their investment strategies. That may leave everyday investors at sea as they try to understand complex strategies, which may include investing with leverage, trading derivatives or taking highly concentrated positions in private companies.

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.”

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