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4 Top Mutual Funds to Buy for a 401 (k) Plan

Some of the best mutual funds for a 401 (k) plan are index funds. Such funds have solid long-term track records, low expense ratios and are actively managed. The biggest players in this segment are Vanguard, Fidelity and American Funds. Almost all the 401 (k) mutual funds come from one of these three big fund houses.

Vanguard is one of the leading investment management companies in the world, courtesy of its low-cost funds. The company offers nearly 300 low-cost funds, which attract a significant portion of investor assets. Fidelity Investments is also one of the largest and oldest mutual fund companies in the world that serves more than 25 million individual customers. American Funds is also one of the biggest investment management organizations globally and has around $1.4 trillion worth of assets under management.

Among the smaller companies is Dodge & Cox that offers some incredible mutual funds for 401 (k) plans as well. Dodge & Cox manages assets worth more than $259 billion and is known for its effective business management.

What is a 401 (k) Plan?

A 401 (k) plan is a retirement savings plan sponsored by the employer. The plan helps workers invest a portion of their savings before taxes are imposed. Taxes aren't charged until the money is withdrawn from the account. To oversee an account, employer generally hires a fund house that provides information on the plan and its performance, manage the paperwork and offer assistance if required. Typically, plan contributions are invested in mutual funds.

The 401 (k) plan, in the meanwhile, was introduced in the 1980s as a supplement to pension funds as their costs escalated with time.

4 Best Mutual Funds for a 401 (k) Plan

We have, thus, highlighted four best mutual funds to be considered for a 401k plan from the above mentioned fund houses. These funds are the best choices when it comes to savings for retirement.

Vanguard Extended Market Index InvestorVEXMX , with a Zacks Mutual Fund Rank #1 (Strong Buy), seeks long-term growth of capital. VEXMX employs an indexing investment approach designed to track the performance of the S&P Completion Index, a broadly diversified index of stocks of small and mid-size U.S. companies.

Managed by Vanguard Group , the fund carries an expense ratio of 0.21%, lower than the category average of 1.09% (read more: Mutual Fund Pitfalls, Mind the Expense Ratio ).

Moreover, VEXMX requires a minimal initial investment of $3,000. It has year-to-date and past year's return of 9.1% and 18.8%, respectively. VEXMX's performance, as of the last filing, when compared to funds in its category was in the top 16.5% in a year, top 8.8% over the past three years, and in the 14.6% over the past five years.

Fidelity BalancedFBALX , with a Zacks Mutual Fund Rank #1, seeks income and capital growth consistent with reasonable risk. FBALX invests approximately 60% of assets in stocks and other equity securities and the remainder in bonds and other debt securities.

Managed by Fidelity , this fund carries an expense ratio of 0.55%, below the category average of 0.83%.

Furthermore, FBALX requires a minimal initial investment of $2,500. It has year-to-date and past year's return of 11.8% and 14.6%, respectively. FBALX's performance, as of the last filing, when compared to funds in its category was in the top 12% in a year, top 7.8% over the past three years, and in the 10.4% over the past five years.

American Funds Growth Fund of America AAGTHX , with a Zacks Mutual Fund Rank #1, provides long-term growth of capital through a diversified portfolio of common stocks. AGTHX primarily invests in common stocks, convertibles, preferred stocks, U.S. government securities, bonds and cash.

Managed by American Funds , the fund carries an expense ratio of 0.66%, lower than the category average of 1.12%.

Moreover, AGTHX requires a minimal initial investment of $250. It has year-to-date and past year's return of 17.3% and 21.3%, respectively. AGTHX's performance, as of the last filing, when compared to funds in its category was in the top 20.3% in a year, top 11.7% over the past three years, and in the 16.1% over the past five years.

Dodge & Cox Stock FundDODGX , with a Zacks Mutual Fund Rank #1, seeks long-term growth of principal and income. DODGX invests primarily in a broadly diversified portfolio of common stocks.

Managed by Dodge & Cox , the fund carries an expense ratio of 0.52%, below the category average of 1.04%.

Furthermore, DODGX requires a minimal initial investment of $2,500. It has year-to-date and past year's return of 8.3% and 23.1%, respectively. DODGX's performance, as of the last filing, when compared to funds in its category was in the top 24.3% in a year, top 9.5% over the past three years, and in the 16.3% over the past five years.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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