When selecting funds for your 401(k), simple is usually better. Actively managed funds with complicated investment strategies often underperform index funds over the long term, and they’ll charge you more through higher expense ratios. Instead, for the most reliable long-term success, opt for funds that offer broad diversification at a low cost.
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This often means choosing index funds and taking a broader perspective when evaluating performance. While active funds may excel in one year, retirement is a long game that requires reliable performance over decades. For that reason, the best-performing 401(k) funds are ones that have excelled over the past 10 or more years.
Bear in mind, however, that choosing funds based solely on performance can lead to overconcentration. For instance, many of the following mutual funds invest in large-cap U.S. stocks because the U.S. large-cap space has outperformed over the past decade relative to other market sectors. But this could change at any point. Different sectors outperform during different market and economic conditions, so it’s important to diversify your portfolio with funds that invest in other areas of the market, including international stocks and fixed income.
One final note: Though this is not a Fidelity funds article, you will notice there are many Fidelity funds on this list. This is because Fidelity is one of the largest 401(k) providers in the nation, so many investors have access to these funds. If your company does not work with Fidelity for its retirement plan, you may be able to find similar funds with your provider.
That said, here are 10 of the top-performing funds to include in your 401(k):
| Fund | Average annual return for the past decade (as of May 18) |
| Fidelity Select Advisor Semiconductors I (ticker: FELIX) | 23.9% |
| Vanguard Information Technology Index (VITAX) | 19.1% |
| Baron Partners Fund (BPTIX) | 18.7% |
| BlackRock Technology Opportunities Fund (BGSIX) | 18.2% |
| Fidelity OTC Portfolio (FOCPX) | 16.5% |
| Fidelity Growth Company Fund (FGCKX) | 16.5% |
| JPMorgan Large Cap Growth Fund (JLGMX) | 15.3% |
| Baron Focused Growth Fund (BFGIX) | 15.2% |
| Calvert Equity Fund (CEYIX) | 13.4% |
| Vanguard PrimeCap Fund (VPMAX) | 12.8% |
Fidelity Select Advisor Semiconductors I (FELIX)
It will likely come as no surprise to have a technology fund top the list of best-performing 401(k) funds over the past decade. The information technology sector soared until 2022, but even with that recent stumble, the Nasdaq Composite Index has gained more than 275% in the past decade.
The Fidelity Select Advisor Semiconductors fund has benefited from this with 23.9% average annual returns over the past 10 years. It invests in companies involved in designing, manufacturing or selling electronic components, vendors for these companies and vendors of electronic systems.
Currently only 29 companies fit that bill, including names like Nvidia Corp. (NVDA), NXP Semiconductors NV (NXPI) and ON Semiconductor Corp. (ON). This is a highly concentrated fund with the top 10 names accounting for 75% of the portfolio, so be sure to pair it with more diversified funds.
Morningstar gives it five stars but a neutral rating, indicating a lack of confidence that the fund will outperform its index or peers over a market cycle.
Vanguard Information Technology Index (VITAX)
For a technology fund that Morningstar analysts have a bit more faith in, try the Vanguard Information Technology Index. With five stars and a gold medal rating, Morningstar’s research team has a high conviction it will outperform over a market cycle despite the fact that its 10-year performance comes in at 19.1% compared to FELIX’s 23.9%.
VITAX also offers a modest 0.1% expense ratio, putting it within the cheapest quintile of its peer group, and a sustainability rating of 5 out of 5. It tracks the performance of the MSCI US Investable Market Information Technology 25/50 Index, which tracks U.S. information technology companies of all sizes. VITAX’s portfolio is currently mostly large growth, with familiar blue-chip names like Apple Inc. (AAPL), Microsoft Corp. (MSFT) and Nvidia topping the list. It holds 364 companies in total, but 64% of the portfolio is still in the top 10.
Baron Partners Fund (BPTIX)
If you want a purely large growth fund that also holds the distinction of being the best performing large growth 401(k) fund over the past 10 years, according to Morningstar data, BPTIX is the fund for you. Its concentrated portfolio of 23 large names like Tesla Corp. (TSLA), Hyatt Hotels Corp. (H) and Charles Schwab Corp. (SCHW) have returned an impressive 18.7% over the past 10 years. That said, a rough 2022 “highlights this fund’s risks,” according to Morningstar senior analyst Adam Sabban.
“The fund amps up volatility with leverage and concentrated stock positions, two key features that are key to its promise and peril,” Sabban writes. “Lead manager Ron Baron allowed longtime holding Tesla to appreciate well beyond the levels typically seen in an open-end mutual fund, exceeding 50% of net assets at times.”
Currently 99% of the fund’s assets are in its top 10 names, with more than 42% of that in Tesla alone. With such concentrated positions, the fund’s returns highly depend on the fate of its top names, making this the least diversified option on this list.
The moral of the story: If you want to invest in BPTIX, make sure you have high confidence in the top names in the portfolio — or at least in management’s ability to pick winners. Morningstar’s analysts, unfortunately, don’t have that faith, giving the fund a neutral badge for low confidence in its ability to outperform despite its four-star rating.
BlackRock Technology Opportunities Fund (BGSIX)
Morningstar analysts have more faith in the BlackRock Technology Opportunities Fund’s future, giving it a gold badge and four stars for an above average process, management and parent company. Analyst Stephen Welch goes so far as to write, “This manager’s tech sector knowledge is tough to match,” referring to lead manager Tony Kim who has spent more than 25 years analyzing tech firms.
Kim and his team of six analysts plus one data scientist seek out companies of all sizes in the U.S. and internationally for their rapid and sustainable growth potential and use of science or technology. This has resulted in a portfolio of 74 companies, with many familiar top names, including Apple, Microsoft and Nvidia. The bulk of the portfolio is in software and services, followed by semiconductors then tech hardware and equipment.
Fidelity OTC Portfolio (FOCPX)
The investment objective of FOCPX is to seek capital appreciation, and it’s delivered with 16.5% annual returns over the past 10 years. It has accomplished this by investing nearly half the portfolio in the information technology sector. Top names include Apple, Microsoft and Amazon.com Inc. (AMZN). That said, FOCPX has the leeway to venture outside of the technology sector, though it will always keep at least 25% of its portfolio in tech stocks.
It invests primarily in assets that trade on the Nasdaq or over-the-counter (OTC) market, which is where you’ll find more small- and mid-cap companies. Since smaller companies have more room for growth than bigger names, this can be a competitive strategy for growth.
Morningstar analysts recently upgraded FOCPX from a bronze to a silver rating, indicating a high conviction it will outperform over a market cycle, thanks to management’s consistently thoughtful approach. It is also rated five stars.
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Fidelity Growth Company Fund (FGCKX)
Another five-star Fidelity fund is FGCKX, which also gets a gold badge from Morningstar. The fund targets companies that Fidelity Management & Research Company LLC believes have the potential for above-average growth, and based on its 16.5% 10-year returns, they’ve been largely successful.
It holds many familiar names, like Apple Inc., Nvidia Corp. and Microsoft, but also ventures into the consumer discretionary realm with names like Lululemon Athletica Inc. (LULU). The portfolio includes 525 different companies, but still holds more than half of its assets in its top 10 names.
JPMorgan Large Cap Growth Fund (JLGMX)
Another front-runner in the large-growth category is JLGMX. The fund has returned 15.3% over the past 10 years, making it a top-quartile performer in its asset class.
JLGMX targets “companies with large markets, sustainable competitive advantages and strong price momentum” in an effort to “harness the return potential of America’s fastest-growing companies,” according to its investment strategy. This has led to a portfolio of companies with an average market capitalization of more than $800 billion. You’ll find many familiar names in the group, including Microsoft, Amazon and Google’s parent company, Alphabet (GOOG).
Unsurprisingly, the bulk of the portfolio is in information technology at nearly 41%. The next heaviest-weight sector is consumer discretionary at a comparatively light 17%.
Morningstar gives it five stars and a bronze rating, so there’s good reason to believe JLGMX will continue to outperform in the near future.
Baron Focused Growth Fund (BFGIX)
BFGIX is also a five-star and gold-rated 401(k) fund by Morningstar. Unlike many other names on this list, BFGIX is a mid-cap growth fund that targets small- and mid-sized companies in the U.S. that managers believe have significant growth potential. Also unlike some other names here, BFGIX does not purport to be diversified.
With only 31 names in the portfolio, it’s unsurprising that more than 60% of the fund’s assets are in the top 10 holdings, which include Tesla, Space Exploration Technologies Corp. and Arch Capital Group Ltd. (ACGL).
At just over 1%, it’s priced right in the middle of its peer group. It’s returned 15.2% on average over the past 10 years.
Calvert Equity Fund (CEYIX)
Socially responsible investing is becoming increasingly popular as it lets investors do good for themselves and the planet. Calvert is an investment manager that has based its entire business model around responsible investing. It applies an environmental, social and governance, or ESG, screen to every investment decision, but then takes this dedication to responsible investing one step further through proxy voting. CEYIX managers, for instance, have used all their proxy votes to support climate change and gender pay equality initiatives.
Besides being a responsible investment fund, CEYIX is also a top performer, returning 13.39% over the past 10 years by investing in “established large-cap stocks with a history of sustained earnings growth at a favorable price.” Morningstar analysts have a high conviction this outperformance will continue, earning CEYIX a silver badge.
Vanguard Primecap Fund (VPMAX)
Vanguard Primecap is a longstanding growth fund that targets large– and mid-cap companies. Since its inception in 1984, it has focused on keeping a low turnover, which helps keep costs low.
It takes a multimanager approach, with multiple portfolio managers working independently to manage portions of the fund. The idea behind this is to provide “diversification of thought,” according to Vanguard.
There are currently five managers listed on the fund, including one who has been helping manage the fund since its inception. The fund has recorded a 12.8% average annual return over the past 10 years, beating the S&P 500 by over a full percent. Morningstar analysts give it four stars and a gold badge, indicating they have the most conviction that it will outperform going forward.
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10 of the Best-Performing 401(k) Funds originally appeared on usnews.com
Update 05/22/23: This story was previously published at an earlier date and has been updated with new information.
