401(k) investments a potential alternative to small-business loans, study finds
A Washington, D.C.-based research group wants to make it possible for individuals to invest up to 10% of their 401(k) money in small businesses through intrastate crowdfunding websites.
In a June 2015 policy study, R Street Institute, which promotes free markets and limited government, proposed a change to federal labor regulations to allow such investment of retirement savings. Sound like a risky venture for retirement funds? To lessen the risk, the group proposed that securities purchased through the crowdfunding sites could be easily resold on secondary markets, making it easier for the investor to cash out.
The proposal aims to give small businesses a way to raise equity capital from ordinary investors in their local communities. It imagines a world where state crowdfunding platforms are “vibrant marketplaces where small companies can raise capital from their own communities,” author Oren Litwin writes…
…To lessen the investment risk, Litwin proposes that the investments be state-regulated and liquid, or easy for investors to cash out, but he also says he recognizes that some people might be wary of investing their retirement funds in a new venture.
“The risks involved are definitely different,” he told NerdWallet. “What I’m hoping to do is provide more options.”
