Best 401(k) Funds From American Funds

We rate the most popular actively managed offerings for retirement accounts.

- NELLIE S. HUANG

AMERICAN FUNDS ARE POPULAR CHOICES for retirement savers. Eight of the firm’s stock funds and six of its target-date portfolios land among the 100 most popular 401(k) funds, a list compiled by BrightScope, a financial data firm that rates workplace retirement plans. In this article, the fourth in a series, we analyze those offerings. (For our view on Vanguard funds, see “Best 401(k) Funds From Vanguard,” Jan.; for our take on Fidelity funds, see “Best 401(k) Funds From Fidelity,” Feb.; and see our T. Rowe Price roundup, “Best 401(k) Funds From T. Rowe Price,” in the March issue.)

The firm behind American Funds, Capital Group, needs some introduction because it has a particular approach. Each fund is run by multiple managers, from as few as two to more than a dozen. But each individual runs his or her own slice of the fund’s assets independently. And each one owns a personal chunk of shares in the fund, in keeping with the firm’s culture.

Below, we review the American Funds Target Date Retirement funds as a group, and eight actively managed funds individually, and rate them “buy,” “sell” or “hold.” All data, including symbols, refer to the share class that’s most accessible to the average investor, in this case Class A. Your 401(k) plan may offer an institutional share class, which may charge a lower expense ratio. All returns are as of February 5.

AMERICAN FUNDS TARGET-DATE RETIREMENT FUNDS: BUY

These target-date funds are fine choices for investors who want an expert to handle their retirement investments. You choose the fund with the year that’s closest to when you plan to retire; American Funds does the rest.