In the early decades of the 20th century, owning stocks was for gamblers, not for the average saver - exciting to talk about, but no place for a family's savings. Regulation was thin, disclosure thinner. Bank trust departments with their marble columns and sober faces kept clients in bonds and municipal debt, with a sprinkling of preferred shares. Common stocks, with their jagged charts and fickle dividends, were for the bold and reckless — a place where widows and orphans should not tread. The market crash of 1929 and the ensuing Great Depression cemented that stigma. People witnessed firsthand how quickly fortunes could vanish.
The stigma lingered. Even after the postwar boom took hold, fiduciaries were bound by "legal list" statutes - state laws dictating exactly what investments fiduciaries (like bank trust departments, trustees, and estate executors) could hold. Safety of principal outweighed total return, which often meant portfolios leaned heavily on fixed income, missing the growth equities delivered.
It wasn't until the 1950s and 1960s, with the arrival of the "Prudent Investor Rule", that blue-chip equities started to trickle into trust portfolios. By the 1980s and 1990s—when 401(k)s, mutual funds, and index funds spread like suburbia—stocks became the backbone of ordinary retirement portfolios, unleashing one of history's greatest wealth-creating engines.
As our dependence on the once-shunned stock market has deepened over the past several decades, the field has thinned. In 1998, U.S. exchanges listed 7,500 companies; by 2023, just 4,300 remained. Heavier regulation has also pushed banks to the sidelines, consolidating credit markets and shifting more financing into private hands. Many of today's fastest-growing companies now stay private for years, fueled by venture and private equity capital. For the ordinary saver, the public slice is thinner than it used to be.
That old story from the 1920s is whispering again, but in a new setting. Private assets—buyout funds, private credit, real estate partnerships, infrastructure plays, even the dreamlike lure of cryptocurrency. Staples in the diet of endowments and pensions, though for the 401(k) saver, they remain behind glass. Complexity, illiquidity, volatility, and opaque pricing have kept them in the "too risky" bucket for decades.
That may be changing. A recent White House executive order directs the Department of Labor and other regulators to rethink how alternative assets might fit into defined-contribution plans. Within 180 days, agencies are to revisit fiduciary guidance, explore safe harbors, and coordinate with the SEC on loosening eligibility definitions — potentially allowing everyday savers to commit a slice of their retirement funds to strategies once reserved for endowments and pension plans.
Voices are loud on both sides. Supporters call it democratization: an overdue recognition that diversification need not stop at the public markets. Critics see only the higher fees, complex arrangements, and murky valuations — hazards that can sink a saver who does not know the depth of the water.
It's a scene we have played before. When the first trust officers bought blue-chip stocks, the prudent shook their heads. Over time, stocks proved their worth as part of a diversified, long-term portfolio, and the head-shakers fell silent. The same may be true of private assets —if they are chosen deliberately, sized with restraint, and matched to the investor's circumstances. In the right hands, with the right purpose, private investments are not a departure from prudence, but an extension of it.
Whether private assets make that leap—from speculation to staple—will hinge on more than regulatory green lights. It will depend on whether fiduciaries can repeat history, applying the same patience and discipline that once turned the stock market from a backroom gamble into the bedrock of retirement savings.