Best 401(k) Investments: Where to Invest

Americans have the power to decide how much to save and how to invest in their 401(k) plan. But too often, they start late, save too little and invest poorly. We can't help you save, but we can point you toward good investments.

Every year, we analyze the most popular actively managed funds — measured by assets — in employer-based retirement savings plans, according to financial data firm BrightScope, and we make recommendations to "buy," "sell" or "hold."

We exclude index funds from our analysis because they tend to do their job, and the decision to invest in one rests largely on what kind of market exposure you seek — large companies or small, say, or foreign stocks.

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Read on for our take on the 10 most popular active 401(k) funds, summarized below in order of assets in defined-contribution plans. All returns are through October 31, 2025.

Where to invest your 401(k)

Vanguard Target Retirement: BUY

Target-date funds are built for investors who want an expert to handle their retirement investing. Vanguard Target Retirement funds charge a low expense ratio, 0.08% per fund, and use a simple approach. The portfolios hold just four index funds, covering total U.S. and total foreign stock and bond markets. Five years before retirement, a short-term inflation-protected bond fund is added as an inflation hedge.

If we had one gripe, it would be that the "glide path" — the mix of stocks and bonds through the life of the fund — is a little less aggressive than we'd like at the start and end.

Funds in the series begin with 90% in stocks and 10% in bonds. Fifteen years later (roughly age 40 for its typical investor), the portfolio starts to lower the risk, until it hits 50% in stocks at retirement. After retirement, the portfolio continues to lighten its stock exposure until its endpoint, a 30% stock, 70% bond mix, seven years after the target year.

The funds in the series have done well: Over the past 10 years, they rank mostly in the top quartile or better of their respective peers.

American Funds Eupac: BUY/HOLD

Eupac (AEPGX), formerly known as EuroPacific Growth, invests in developed and emerging-markets stocks — an "all-you-can-eat buffet" of international holdings, says David Polak, leader of the stock team at Capital Group, the parent company behind American Funds. The U.K., Japan and Germany are the fund's biggest country exposures, but 15% of assets are in emerging markets.

Eupac's 13 managers divide the assets and run their sleeves individually, in keeping with the firm's approach to managing funds. Over the past 15 years, they beat the fund's benchmark — albeit by a slim margin — with a 6.6% return.

Dodge & Cox Stock: BUY

Dodge & Cox Stock (DODGX), a true-blue value-oriented fund, has delivered competitive returns, even though its investment style has long been out of favor. Over the past 15 years, the fund, a member of the Kiplinger 25, our favorite no-load mutual funds, has returned 12.7% annualized, which is respectable, but falls short of the S&P 500 Index's 14.5%. The fund has beaten 93% of all large-company value funds, too.

Six managers hunt for U.S. stocks that trade at a discount to their growth potential. Lately, the managers have been beefing up stakes in the struggling health care sector, including Regeneron Pharmaceuticals (REGN) and UnitedHealth Group (UNH). Health is now the fund's biggest sector, at 27% of assets.

Value funds play a key role in any diversified portfolio, and these days they can be a hedge against the growth-tilting S&P 500. The fund tends to hold up well in down markets, too. In 2022, when the S&P 500 lost 18%, Dodge & Cox Stock lost just 7%.

JPMorgan Large Cap Growth: BUY

The JPMorgan Large Cap Growth Fund (OLGAX) is a pure growth strategy, which in practical terms means that Nvidia (NVDA) makes up an even bigger chunk of the portfolio than it does in the S&P 500. That's partly why this fund may best be used in concert with a core U.S. stock index fund, at least, and maybe even a value-oriented fund as well.

To keep risk in check, longtime manager Giri Devulapally and his four cohorts pay heed to valuation, tracking stocks against their historical measures and trimming when they appear overextended, says Morningstar analyst Andrew Redden. And the group buys on dips, adding stakes to Amazon.com (AMZN) in early 2023, for instance, after shares had declined in previous months.

That approach has helped the fund hold up better in bad times compared with peers. In 2022, JPMorgan Large Cap Growth lost 26%, while peers lost 30%. The fund's 10-year record, 18.5% annualized, beats 92% of all large-growth funds.

Vanguard Primecap: BUY

The celebrated managers behind this 40-year-old fund favor growing, value-priced companies with a catalyst to drive earnings and stock prices higher. But the fund lagged the broad market in four of the calendar years between 2019 and 2024.

Be patient. The fund managers' penchant for buying at a discount has been a disadvantage of late. And health care stocks, a 24% chunk of the fund, have struggled in recent years. Despite the recent draggy performance, over the past 15 years, the fund's 14.8% annualized return beats the S&P 500 and 95% of its peers.

The Vanguard Primecap Fund (VPMCX) is best for investors with long time horizons. The managers have an average holding period of 10 years. "In order to benefit from the portfolio managers' stock picks, you should match your time horizon with the time horizon of the manager," says Ryan Barksdale, head of active stock funds at Vanguard. .

Vanguard Wellington: BUY

This nearly century-old balanced fund — it holds roughly 65% of assets in stocks and 35% in bonds — is a reliable performer, and moderate-risk investors looking for a one-stop core holding should waste no time adding it to their portfolio. Vanguard Wellington (VWELX) is also a member of the Kiplinger 25.

Dan Pozen picks the stocks and Loren Moran chooses the bonds. Both are with Wellington Management, the fund's subadviser. Pozen holds mostly U.S. large-cap stocks with durable businesses and good earnings growth potential. Moran focuses on high-quality corporate debt, government IOUs and asset-backed securities. Over the past five years, the pair's 11.1% annualized return has beaten 85% of the fund's peers.

The fund has a quality tilt, so it tends to lag in momentum-driven rallies, says Vanguard's Barksdale. But when the stock market gets jittery, Wellington shines. During the tariff-related swoon in early 2025, Wellington lost 12%, in line with a benchmark of 65% S&P 500 and 35% Bloomberg U.S. Aggregate Bond index (the S&P 500 lost 19%).

American Funds Target Date Retirement: BUY

Retirement savers often think about target-date funds for the accumulation phase, but many target-date series also aim to help retirees preserve wealth and cover their costs well past retirement age. American Funds Target Date Retirement funds, for instance, keep working until you hit age 95. The glide path starts with 90% in stocks, hits 45% stocks at retirement age and levels out at the end at 30%.

One distinctive trait of this target series is its "glide path within a glide path," says Kelly Campbell, multi-asset solutions lead at Capital Group. When you're 30, for instance, growth stocks command the stock side. But dividend stocks dominate holdings for older investors. "A 25-year-old shouldn't own the same kinds of equities as an 85-year-old," she says. Actively managed strategies from American Funds fill the target-date portfolios.

The end result is a target-date series that ranks well above average over the long haul. Funds with target years between 2030 and 2060 boast 10-year returns that rank among the top 12% of their respective peers or better.

Fidelity Freedom: BUY

Each target-date series glide path is a little different. For savers in their mid-twenties with 40 years of work ahead of them, this series starts with 90% in stocks — and most importantly, it stays that way for the next 20 years. Indeed, a significant scaling back in stocks doesn't start until age 50.

By the time savers hit 65, the Fidelity Freedom target-date funds hold about 55% of assets in stocks. And the de-risking continues for another 20 years, when the funds hit their most conservative allocation of 24% in stocks (backed by a 46% slug in bonds and 30% in short-term funds). That's more aggressive in the early years of the glide path and more conservative at the end compared with other target-date series we've highlighted here.

The biggest pluses with the Freedom series, however, are the underlying funds, which are run by some of the firm's star managers, including Will Danoff of Fidelity Contrafund, Ford O'Neil of Fidelity Total Bond and Steve Wymer of Fidelity Growth Company. Each has won a Morningstar award for portfolio management at some time or another.

Fidelity Freedom funds were laggards in the early 2000s. But since a retooling in the 2010s, they're clicking on all cylinders. All of the funds boast solid one-, three-, five- and 10-year records. At times, however, those above-average returns can come with above-average volatility, too.

Fidelity Contrafund: BUY

Will Danoff, who has skippered the Fidelity Contrafund (FCNTX) for 35 years, favors "best of breed" businesses that hold up better during periods of uncertainty, and he isn't afraid to let winners run. Berkshire Hathaway (BRK.B) has been in the fund since 2002 and provided some ballast in early 2025. It accounts for 7% of the fund's assets. "Betting big when you have a good idea is a core tenet" of the fund, he says.

Contrafund has consistently turned in above-average returns with below-average volatility over the past three, five and 10 years compared with its large-company growth fund peers. That makes it a good option for young investors who want an aggressive fund. But its relatively low volatility means older savers could consider it for money they don't need in the near or medium term.

Vanguard Equity Income: BUY

The Vanguard Equity Income Fund (VEIPX), a Kip 25 member, is the only actively managed dividend-stock fund in the top ranks of 401(k) funds. It's a good choice for moderate- to low-risk investors looking to maintain some exposure to the stock market. It yields 2.2%.

New managers took over in 2021, but so far, so good. Matthew Hand, a Wellington Management stock picker, runs two-thirds of the assets, and Sharon Hill, of Vanguard's in-house quantitative stock group, runs the rest. Since they started managing the fund together, Equity Income has returned 10.3% annualized — better than the typical large-company value fund, with less volatility, too.

Hand favors stable dividend payers trading at reasonable valuations. Hill leans into a customized computer model that emphasizes dividends and free cash flow (the money left over after operating expenses and spending to maintain or upgrade long-term assets). The managers' different approaches, says Vanguard's Barksdale, offset each other over the short term, but over the long term, the result is a smoother ride.

Note: This item first appeared in Kiplinger's Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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