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The Best American Funds for 401(k) Retirement Savers

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No doubt you’ve heard of American Funds. But unless you worked through an adviser, chances are you don’t own one of their funds. That’s because until recently, you couldn’t buy American’s funds without going through an adviser, plus there was a fat commission to pay. That’s changed recently. The firm made a low-fee share class available at certain brokerage firms, including Fidelity and Schwab, for no sales commission.

None of that matters if you can invest in American’s funds in your 401(k) plan – there’s no load and no adviser is required. And you’re in luck: Many of their funds are standouts. That’s in part due to the way that Capital Group, the firm that manages the American Funds, runs its products.


The firm’s investing approach, The Capital System, is unique. Each portfolio has multiple managers, from as few as two to as many as 13. Groupthink is frowned upon. Each manager runs his or her own portion of assets independently and is free to develop his or her own investing style – within the constraints of the fund’s mandate, of course. American Funds managers also are encouraged to invest their own money in the portfolios they run. Nearly every fund has at least one manager at the wheel with more than $1 million of his or her own money in the portfolio.

We will look at some of the best American funds for your 401(k) and filter out some lesser options. This year, eight American Funds stock portfolios and one target-date fund ranked among the most popular 401(k) funds. As we did with popular retirement-plan funds from Vanguard, Fidelity and T. Rowe Price, we pick apart each American Funds portfolio on the list of the top hundred 401(k) funds and rate them either “buy,” “sell” or “hold.”

SEE ALSO: The 25 Best Low-Fee Mutual Funds You Can Buy

Returns and data are as of Oct. 25, 2018, unless otherwise noted. Three- and five-year returns are annualized.


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