Make the Most of Your 401(k)
Kiplinger's Personal Finance|February 2022
We weigh in on a baker’s dozen of the most popular actively managed retirement plan funds.
NELLIE S. HUANG
SAVING MONEY IN YOUR 401(K) ACCOUNT is easy compared with figuring out how to invest it. Sifting through the myriad funds available in your plan can be intimidating, and maybe even paralyzing. But it doesn’t have to be. Every year, we analyze the most popular mutual funds in retirement plans, rating them Buy, Sell or Hold, with some help from financial data firm BrightScope, which provides us with a list of the 100 funds with the most 401(k) assets.

As always, this story is meant to help retirement savers make good choices among the funds that are available in their 401(k) plan. Unless your retirement savings plan offers a self-directed brokerage window, your investment choices are limited to what’s offered in your plan. (One in five of the plans that Vanguard administers offers a brokerage window, according to the firm, one of the largest 401(k) plan administrators in the U.S.) That means you must make smart choices, keeping in mind your tolerance for risk and your time horizon.

The funds we highlight here are the 13 most popular actively managed funds in 401(k) plans. We don’t analyze the index funds that are hugely popular in 401(k) plans because the decision to invest in one typically hinges mostly on whether you want exposure to a particular asset class— U.S. stocks, say, or foreign shares. But actively managed funds are different. Some are better than others. Managers change, which can affect performance. And sometimes good funds lag the broad market for good reason—say, if a fund follows an investment style that is temporarily out of favor.

In the fund reviews that follow, we refer to returns and data for the share class that is available to most investors. Your retirement savings plan may offer a different share class, with slightly different returns and expense ratios, depending in part on the overall size of the plan. Returns and other data are through December 3.

American Funds EuroPacific Growth: BUY

We don’t write about American Funds often because its funds traditionally charge a sales fee and are adviser-sold. (A few brokers, including Fidelity and Schwab, now offer a no-fee share class for self-directed investors.)

But American funds are widely held in 401(k) plans, and EuroPacific Growth is the most popular foreignstock fund. It’s a solid choice. Over the past five and 10 years, it outpaced the MSCI EAFE index, which tracks foreign stocks in developed countries.

Ten experienced managers work independently, managing their own portion of the fund’s assets. Each manager looks for high-quality companies with good long-term growth prospects in Europe and the Pacific Basin. Japan, the Netherlands and China are the fund’s biggest country exposures. With a hefty $181 billion in assets, the fund invests mostly in large companies. ASML Holding, Reliance Industries and Sea Limited are top holdings.

American Funds Growth Fund of America: BUY

The buy rating here comes with a caveat: Although Growth Fund of America, which invests in large, growing companies, has outpaced the S&P 500 over the past three, five and 10 years, the fund is just average next to its peers. In fact, its three- and five-year annualized returns rank below average among large growth funds.

That’s partly because although the fund’s 13 managers focus on big growth themes—such as electric vehicles— they also invest in cyclical companies and turnaround situations with good growth prospects. Tesla, Microsoft and Netflix were top holdings at last report. The strategy provides a smoother ride: Volatility has been below average relative to large growth funds over the past five and 10 years.

Dodge & Cox Stock: BUY

Continue reading your story on the app

Continue reading your story in the magazine

MORE STORIES FROM KIPLINGER'S PERSONAL FINANCEView All

Find ATTRACTIVE YIELDS in Today's Market

Our field guide to income investments identifies opportunities that range from ordinary to downright exotic.

10+ mins read
Kiplinger's Personal Finance
June 2022

Profit From Healthy Profit Margins

These companies find ways to flourish even in tough times

7 mins read
Kiplinger's Personal Finance
June 2022

Fight Back Against High Inflation

Whether you’re 28 or 68, you’re staring down a surge in con-sumer prices. But for many millennials, the precipitous rise in inflation—which reached an overall rate of 8.5% in March—has been especially steep.

2 mins read
Kiplinger's Personal Finance
June 2022

Create a Financial Plan for a NATURAL DISASTER

You’ll recover more quickly if your important documents are secure.

9 mins read
Kiplinger's Personal Finance
June 2022

Caregivers Share Their Stories

My column on caregiving (see “Living in Retirement,” Feb.) generated a number of responses from readers who offered their own perspectives. “People not in this situation don’t have a clue, and that includes ‘experts,’ ” writes Ken Jarosch, sole caregiver for his wife, Kathy, who suffers from muscular dystrophy. “I went to several caregiving classes, where we were served a nice dinner and a sunshine talk. But the real help came from the people in attendance, who actually live this.”

2 mins read
Kiplinger's Personal Finance
June 2022

Buy Bonds Now? That Depends

I insist it is folly to quit sound invest-ments because of a bad quarter, but the bond market swoon of early 2022 tests my resolve. When superb stuff such as tax-exempt toll-road bonds, taxable infrastructure municipals and BBB corporates suffer losses of 6% to 10%, that is true shock and awe. The last time returns took a big wallop was the summer “taper tantrum” of 2013, when, despite the absence of inflation, traders overreacted to Federal Reserve plans to cut back bond purchases. That episode is remembered now as an epic buying opportunity— thus, it is tempting to interpret the current downturn in the same vein.

2 mins read
Kiplinger's Personal Finance
June 2022

ABLE Accounts Offer Financial Independence

People with disabilities, and their families, can save for a variety of expenses in these tax-advantaged accounts.

3 mins read
Kiplinger's Personal Finance
June 2022

Answers to Your SOCIAL SECURITY QUESTIONS

Figuring out how to get the most out of your benefits is not as simple as it looks.

10+ mins read
Kiplinger's Personal Finance
June 2022

THE MONEY TALK NEW COUPLES NEED

Whether or not you merge your finances, you need to be on the same page. Natalie and Dan Slagle are founders of Fyooz Financial Planning, a financial planning firm that specializes in advising couples.

3 mins read
Kiplinger's Personal Finance
June 2022

An Urgent Need for Cybersecurity

In June 2017, Russian hackers launched a malware attack on Ukraine called NotPetya. The attack, which locked users out of their own files unless they paid a ransom in bitcoin, was just one more tactic in the conflict between the two nations that had begun three years earlier. But viruses don’t respect borders, and this one spread far beyond Ukraine.

5 mins read
Kiplinger's Personal Finance
June 2022