Skip to headerSkip to main contentSkip to footer
Get our Free E-newslettersGet our Free E-newsletters
Kiplinger logoLink to homepage
Get our Free E-newslettersGet our Free E-newsletters
Subscribe to Kiplinger
Subscribe to Kiplinger
Save up to 76%
Subscribe
Subscribe to Kiplinger
  • Store
  • Home
  • Investing
  • Retirement
  • Taxes
  • Personal Finance
  • Your Business
  • Wealth Creation
  • More
    • Podcasts
    • Economic Outlooks
    • Tools
  • My Kiplinger
    • Kiplinger's Personal Finance Magazine
    • The Kiplinger Letter
    • The Kiplinger Tax Letter
    • Kiplinger's Investing for Income
    • Kiplinger's Retirement Report
    • Store
    • Manage My E-Newsletters
    • My Subscriptions
  • Home
  • investing
  • mutual funds
mutual funds

The Best American Funds for 401(k) Retirement Savers

American Funds has 14 actively managed mutual funds among the 100 most popular 401(k) offerings. We look at the Best American Funds in that group, and the laggards.

by: Nellie S. Huang
March 9, 2021
American Funds logo

Kiplinger

Some of the biggest funds in the country, as measured by assets, are from American Funds, but do-it-yourself investors probably aren't familiar with the firm. That's because, for a long time, these funds were only available for purchase through an adviser. (Today, some online brokers offer a no-load share class of these funds to regular investors.)

Even so, American Funds are popular choices in workplace retirement savings plans. Eight of the firm's stock funds and six of its target-date series portfolios land among the 100 most popular 401(k) funds. The list of popular 401(k) funds comes courtesy of BrightScope, a financial data firm that rates workplace retirement plans.

Capital Group, the firm that manages American Funds, has a particular approach. Each fund is run by multiple managers, from as few as two to more than a dozen. A well-crafted group of managers, the thinking goes, can produce good results with less volatility. But each manager runs his or her slice of the fund's assets independently, using their own investment approach within the confines of the fund's directive. And they each have a chunk of their own money in the fund, in step with the company's culture. Many American Funds have at least one manager with more than $1 million of his or her own money invested in the portfolio.

Here's our take on American Funds' most popular funds in 401(k) plans. We'll review all 14 – the eight actively managed funds independently, as well as the target-date funds as a whole – rating each Buy, Sell or Hold.

  • The 25 Best Low-Fee Mutual Funds You Can Buy
Returns and data are as of March 8, unless otherwise noted, and are gathered for the share class with the lowest required minimum initial investment – typically the investor share class or A share class. The share class available in your 401(k) plan may be different.

1 of 9

American Funds AMCAP: HOLD

Concept art of person lining up blocks with upward-facing arrows on them.

Getty Images

  • Symbol: AMCPX
  • Expense ratio: 0.69%
  • One-year return: 31.4%
  • Three-year annualized return: 12.5%
  • Five-year annualized return: 16.0%
  • 10-year annualized return: 13.3%
  • Rank among the top 401(k) funds: #86
  • Best for: Nervous stock investors looking for a stable ride

American Funds AMCAP Fund's top holdings include Netflix (NFLX), Microsoft (MSFT), Google parent Alphabet (GOOGL) and Amazon.com (AMZN) – the usual suspects for funds that invest in large, growing companies. But AMCAP has lagged its peers over the past one-, three-, five- and 10-year periods, on an annualized return basis.  

Eight managers run the fund, investing in companies of any size with sustainable competitive advantages, identifiable long-term opportunities and a reasonable stock price. AMCAP holds more than 200 stocks, with a tilt toward technology, healthcare and communications services firms.

AMCAP's heftier weighting in midsize company stocks relative to peers (24% compared with 14%) and its sizable cash position – typically in the double-digits, according to Morningstar – have been a drag in recent years. But things can change: When smaller stocks rallied in late 2020, the fund did, too.

Investors should view AMCAP as a moderate growth portfolio, best for risk-averse investors who want some growth-stock exposure but want to avoid the volatility of an aggressive growth fund. The fund fared slightly better than the broad market during the March selloff in 2020, for instance, albeit only by a bit.

Recent changes to the management team are worth noting. Two longtime managers, Claudia Huntington and Eric Richter, retired in late 2020, and two new managers, Cheryl Frank and Jessica Spaly joined the fund. Frank and Spaly, however, both have 20-plus years of experience in the investment world; most of those have been at Capital Group.

Learn more about AMCPX at the American Funds provider site.

  • 2021's Best Mutual Funds in 401(k) Retirement Plans

2 of 9

American Funds American Balanced: BUY

Metal balls balancing on beams

Getty Images

  • Symbol: ABALX
  • Expense ratio: 0.58%
  • One-year return: 15.1%
  • Three-year annualized return: 9.0%
  • Five-year annualized return: 10.5%
  • 10-year annualized return: 9.5%
  • Rank among the top 401(k) funds: #30
  • Best for: Moderate-risk investors in search of a fund that holds stocks and bonds

American Funds American Balanced is one of Capital Group's most reliable performers. As its name implies, American Balanced holds roughly 60% of its assets in stocks and 40% in bonds. In nine of the past 11 calendar years, the fund has outpaced its peers, the group that Morningstar awkwardly dubs "Allocation, 50% to 70% Equity."

The stock side of ABALX holds a mix of dividend-paying and growth-oriented large-company shares. Microsoft, UnitedHealth Group (UNH) and Broadcom (AVGO) were among fund's biggest stock holdings at last report. The bond side holds a mix of high-quality corporate and government and government-backed debt.

Ten managers have a hand in American Balanced; three have been in place for a decade or more.

Learn more about ABALX at the American Funds provider site.

  • The Best T. Rowe Price Funds for 401(k) Retirement Savers

3 of 9

American Funds Capital World Growth and Income: HOLD

A glass globe

Getty Images

  • Symbol: CWGIX
  • Expense ratio: 0.76%
  • One-year return: 27.7%
  • Three-year annualized return: 8.5%
  • Five-year annualized return: 12.6%
  • 10-year annualized return: 9.0%
  • Rank among the top 401(k) funds: #90
  • Best for: Low-risk investors in search of a one-stop foreign and U.S. stock fund

Global funds, which invest in stocks of companies all over the world, haven't had a good run lately because foreign markets have lagged U.S. stocks. American Funds Capital World Growth and Income, which holds half of its assets in foreign stocks and the rest in U.S. shares, has returned 12.6% annualized over the past five years, for instance. That lags the S&P 500 by a whopping average of 3.6 percentage points per year.

But the fund's performance relative to its peer group is what gives us reason for pause. Annualized returns over the past three, five and 10 years rank in the middle of the pack of world stock funds that invest in large companies.

CWGIX's nine managers look to balance income and growth by investing in established companies around the world. Many are well-known names – Microsoft, Broadcom and Taiwan Semiconductor Manufacturing (TSM) were the fund's top holdings at last report – that have a history of paying regular dividends. The fund yields 1.2%.

Despite the average-ish track record, CWGIX rarely ranks among the bottom of the pile, which is why we rate Capital World Growth and Income a Hold. What's more, the fund has earned that record with below-average volatility. That might appeal to low-risk investors looking for a foreign-stock fund.

Learn more about CWGIX at the American Funds provider site.

  • The Best Fidelity Funds for 401(k) Retirement Savers

4 of 9

American Funds EuroPacific Growth: HOLD

A businessman pointing to the side of the map with Europe and Asia

Getty Images

  • Symbol: AEPGX
  • Expense ratio: 0.84%
  • One-year return: 35.2%
  • Three-year annualized return: 8.7%
  • Five-year annualized return: 12.9%
  • 10-year annualized return: 7.2%
  • Rank among the top 401(k) funds: #3
  • Best for: Foreign-stock investors

American EuroPacific Growth is the most popular foreign-stock fund in 401(k) plans, as well as the company's most popular fund overall, according to BrightScope. AEPGX, which opened in 1984, is one of the oldest foreign-stock funds in the country, and with more than $190 billion in assets, it's also one of the largest.

Nearly 40% of the fund's assets are invested in European companies, with another 36% in Asia (particularly in Japan, China and India), with the rest splashed around Canada and Latin America. Reliance Industries, an Indian conglomerate, Latin American e-commerce company MercadoLibre (MELI) and Dutch tech company ASML Holding (ASML) are among the fund's top three holdings.

Like many other investments, it had been on a roll but has stumbled into a little volatility of late. But it's still up more than 35% over the past 12 months, outpacing all but about a third of its peers: funds that invest in large, growing foreign companies. AEPGX handily beats the MSCI EAFE index of foreign stocks in developed countries, too.

But over the long haul, the fund has been just average relative to its peers. Its 10-year annualized return ranks roughly around the middle of stock funds that invest in growing companies. Even worse, over that stretch, AEPGX was more volatile than the typical foreign large-growth stock fund.

Occasional slumps are to be expected with any fund, of course. And going further back, the fund shines. Over the past 15 years, EuroPacific Growth outpaces the MSCI EAFE index of stocks in developed countries as well as its peer funds.

Even so, consider pairing an investment in AEPGX with an index fund, or another actively managed fund in your plan if one is available.

Learn more about AEPGX at the American Funds provider site.

  • The Best Vanguard Funds for 401(k) Retirement Savers

5 of 9

American Funds Fundamental Investors: HOLD

Stack of blue poker chips

Getty Images

  • Symbol: ANCFX
  • Expense ratio: 0.61%
  • One-year return: 27.8%
  • Three-year annualized return: 10.9%
  • Five-year annualized return: 15.0%
  • 10-year annualized return: 12.1%
  • Rank among the top 401(k) funds: #84
  • Best for: Investors looking for a more value-oriented fund

American Funds Fundamental Investors was a star in the aughts. But these days, performance has been lumpy.

In six of the past 11 calendar years (including 2020), Fundamental Investors has delivered below-average annual returns for its peer group: funds that invest in large-company stocks with a mix of growth and value characteristics. And over the past decade, the ANCFX's 12.6% annualized return trails the S&P 500 by an average of roughly 1 percentage point per year. That's why we rate the fund a Hold.

To be fair, a 12.6% annualized 10-year return, in the grand scheme of things, is pretty good. But with a roster of top 10 stocks that includes Amazon.com (AMZN), Facebook and Netflix, it's a wonder the fund hasn't done better.

It might have to do with the fund's broad mandate.

For starters, roughly 20% of the assets in Fundamental Investors is invested in foreign stocks – way above the typical 2% of its peers. The fund can invest up to 35% of its assets in non-U.S. companies. And the strategy has a contrarian tilt. The fund's six managers look for undervalued large-company stocks with underappreciated potential for growth in sales, earnings and dividends. Investment approaches like that can take patience as investment theories might take time to play out.

Learn more about ANCFX at the American Funds provider site.

  • 65 Best Dividend Stocks You Can Count On in 2021

6 of 9

American Funds The Growth Fund of America: HOLD

Concept art of money trees growing out of the ground

Getty Images

  • Symbol: AGTHX
  • Expense ratio: 0.64%
  • One-year return: 41.8%
  • Three-year annualized return: 16.2%
  • Five-year annualized return: 19.7%
  • 10-year annualized return: 14.5%
  • Rank among the top 401(k) funds: #15
  • Best for: Timid investors seeking a stock fund with a smoother ride

American Funds The Growth Fund of America is the most popular U.S. stock fund from American Funds in 401(k) plans. It's also a $252 billion behemoth, making it one of the biggest actively managed funds in the country by assets.

The 13 managers who run the 47-year-old fund have a broad view of what qualifies as a growth company. For instance, some of the fund's 371 stocks are companies that are turning around. Others are out-of-favor firms, and still others are classic growth businesses with the potential to generate rising earnings and revenue.

Tesla (TSLA), Netflix and Microsoft are the fund's top holdings. But despite the "of America" part of its name, a little more than 10% of its assets are invested abroad, in Europe and Asia.

On an annualized basis, Growth Fund of America doesn't stand out. But it's not a stinky fund either. It has beaten its typical peers in just five of the past 10 calendar years, for instance. However, its risk-adjusted return is head and shoulders above its peers and the S&P 500. All told, we rate AGTHX a Hold.

Learn more about AGTHX at the American Funds provider site.

  • 11 Nasdaq-100 ETFs and Mutual Funds to Buy

7 of 9

American Funds New Perspective: BUY

Globe

Getty Images

  • Symbol: ANWPX
  • Expense ratio: 0.76%
  • One-year return: 39.9%
  • Three-year annualized return: 15.0%
  • Five-year annualized return: 17.4%
  • 10-year annualized return: 12.1%
  • Rank among the top 401(k) funds: #57
  • Best for: Investors in search of growth across the globe

Only a handful of foreign stock funds land among the roster of top 100 401(k) funds, and three of them are from American Funds. Of those, American Funds New Perspective is its best foreign-stock fund offering.

Its mandate is to invest in multinational firms with strong growth prospects that are poised to benefit from "changing global trading patterns." Seven managers roam developed and emerging countries looking for growing companies that generate at least 25% of their revenues abroad and have $3 billion in market value at the time of purchase.

The managers focus on companies, not countries or regions. But in the end, more than half of ANWPX's assets are invested in U.S. firms. In fact, eight of the fund's top 10 holdings – including Tesla, JPMorgan Chase (JPM) and PayPal (PYPL) – are American firms. European firms comprise about a quarter of the fund's assets; Asian companies in developed and emerging countries make up 13%.

New Perspectives has served its shareholders well. Over the past 10 years, the fund's 12.1% annualized return beats 87% of its peers: funds that invest in large companies all over the world.

Learn more about ANWPX at the American Funds provider site.

  • Where Millionaires Live in America

8 of 9

American Funds Washington Mutual Investors: HOLD

Stock charts and ticker prices

Getty Images

  • Symbol: AWSHX
  • Expense ratio: 0.59%
  • One-year return: 24.2%
  • Three-year annualized return: 10.8%
  • Five-year annualized return: 13.9%
  • 10-year annualized return: 12.2%
  • Rank among the top 401(k) funds: #51
  • Best for: Conservative investors who want a low-volatility stock fund

When this fund launched in 1952, many investors were nervous about getting back into the stock market. To appeal to these conservative investors, Capital Group created a set of strict eligibility rules for the kinds of stocks that American Funds Washington Mutual could own. Those rules, combined with AWSHX's income-first, growth-second objectives, favor large companies with strong balance sheets and a history of paying dividends.

But next to its peers – funds that invest in large companies with a mix of either value or growth characteristics – Washington Mutual looks a little dull. No matter how you slice it, whether it's on a long-term annualized return basis or measuring year-by-year returns, the fund's performance is mediocre.

In exchange for its tepid returns, however, AWSHX has been consistently less volatile than its peers and the broad market, and that might be a draw for some investors. Over the past 10 years, Washington Mutual has been 11% less volatile than the broad market (as measured by the S&P 500).

What's more, an economic recovery could bode well for the kinds of companies that Washington Mutual favors. More than 25% of the fund's assets are invested in industrial and financial services firms. As the market shifts from a focus on growth to a focus on more economically sensitive stocks (the so-called reflation trade), Washington Mutual could see a rebound in returns. For these reasons, we rate the fund a Hold.

Learn more about AWSHX at the American Funds provider site.

  • The Best Online Brokers, 2020

9 of 9

American Funds Target Date Retirement Series: BUY

An older Asian looks at their account on a tablet

Getty Images

  • Rank among the top 401(k) funds: #77 (AACTX, 2020) #63 (AADTX, 2025); #49 (AAETX, 2030); #68 (AAFTX, 2035); #72 (AAGTX, 2040); #99 (AAHTX, 2045)
  • Best for: Best for savers who want to put their investments on auto-pilot

Target-date funds are a fine choice 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 and let American Funds handle the rest.

The series' glide path starts conservatively, relative to other target-date series peers. Investors with 45 years in the workforce to go hold roughly 85% in stocks (mostly in large, growing U.S. firms) and the rest in bonds and cash. Over time, as retirement nears, the stock exposure shrinks and tilts toward funds that invest in steadier, slower-growth companies, rather than more volatile, growthier fare. After retirement, the glide path continues to shift for another 30 years (until roughly age 95), when it ends with roughly 30% of assets in mostly dividend-paying stocks and the rest in bonds and cash.

American Funds 2030 Target Date Retirement, the most popular of the firm's target funds in 401(k) plans, holds roughly 65% of its assets in stocks and 35% in bonds and cash. Its top holdings are two growth-and-income-oriented funds, Washington Mutual and Investment Company of America (AIVSX), and the bond fund U.S. Government Securities (AMUSX), all from American Funds.

In early 2020, American Funds restructured and beefed up the group that manages these funds. That might have little impact on the series' performance, but any change like that is always worth noting.

Learn more about American Funds' target-date retirement series at the American Funds provider site.

  • 20 Dividend Stocks to Fund 20 Years of Retirement
  • Kiplinger's Investing Outlook
  • mutual funds
  • 401(k)s
  • Investing for Income
Share via EmailShare on FacebookShare on TwitterShare on LinkedIn

Recommended

10 Questions Retirees Often Get Wrong About Taxes in Retirement
retirement

10 Questions Retirees Often Get Wrong About Taxes in Retirement

You worked hard to build your retirement nest egg. But do you know how to minimize taxes on your savings?
April 7, 2021
The 25 Best Low-Fee Mutual Funds You Can Buy
mutual funds

The 25 Best Low-Fee Mutual Funds You Can Buy

The key to building wealth long-term is buying high-quality, low-cost mutual funds run by seasoned stock pickers. Here are our favorites: The Kiplinge…
March 27, 2021
Taking a 401(k) Loan to Fill Income Gaps? Tips Before You Dip!
401(k)s

Taking a 401(k) Loan to Fill Income Gaps? Tips Before You Dip!

If your credit card charges 17% interest and a loan from your 401(k) charges 4.25%, you might wonder: What have I got to lose? Yes, there are downside…
March 26, 2021
How the Kiplinger 25 Fared in 2020
Kip 25

How the Kiplinger 25 Fared in 2020

Our flock of actively managed funds survived a wild year and as a group delivered benchmark-beating gains.
March 24, 2021

Most Popular

The Perfect Storm for Retirees
retirement planning

The Perfect Storm for Retirees

Today’s retirees could face a perfect storm because they are living longer and spending more time in retirement, while at the same time losing access …
April 18, 2021
The Wrong Way to Achieve Wealth
personal finance

The Wrong Way to Achieve Wealth

For some down-to-earth, basic advice on money and life, I have a book to recommend: “Your Total Wealth: The Heart and Soul of Financial Literacy.”
April 17, 2021
Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs
Coronavirus and Your Money

Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs

People have lots of questions about the new $3,000 or $3,600 child tax credit and the advance payments that the IRS will send to most families in 2021…
April 14, 2021
  • Customer Service
  • About Us
  • Advertise With Us (PDF)
  • Privacy Policy
  • Cookie Policy
  • Kiplinger Careers
  • Accessibility
  • Privacy Preferences

Subscribe to Kiplinger's Personal Finance

Be a smarter, better informed investor.
Save up to 76%Subscribe to Kiplinger's Personal Finance
Dennis Publishing Ltd logoLink to Dennis Publishing Ltd website
Do Not Sell My Information

The Kiplinger Washington Editors, Inc., is part of the Dennis Publishing Ltd. Group.
All Contents © 2021, The Kiplinger Washington Editors

Follow us on InstagramFollow us on FacebookFollow us on TwitterConnect on LinkedInConnect on YouTube