Retirement investors face a challenging conundrum when choosing the best 401(k) funds: how to discern the value for the fees you pay. High fees can only be rationalized if a fund has consistently demonstrated an ability to outperform its benchmarks over the long haul.
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This brings us to a central debate in the investing world: the battle between active and passive investment strategies. While active managers aim to harness their expertise to outperform market benchmarks like the S&P 500, their passive counterparts take a simple approach: tracking the performance of indices such as the S&P 500 or Nasdaq composite. If you can’t beat them, join them.
Passive funds charge very low fees, whereas many active funds have expense ratios that surpass the 1% mark. And the sobering reality is that fewer than 13% of U.S. mutual funds outperform the S&P 500 over a decade, according to S&P Dow Jones.
While passive funds are a good fit for many investors, a few niche active managers validate their fees by consistently delivering superior performance.
We took a look at nine of the best-performing 401(k) funds from the past decade, featuring a mix of active and passive funds that span various investment strategies. There’s likely a fund for every investor on this list.
Note that mutual funds come in different share classes. When you invest outside of your 401(k) plan, you use the investor share class, whereas within your 401(k) plan, you’ll have access to the institutional share class. The institutional classes come with different ticker symbols and often lower expense ratios, but will have the same portfolio.
| 401(k) Fund | Expense Ratio | 10-Year Average Return |
| Fidelity Select Semiconductors Portfolio (ticker: FSELX) | 0.65% | 27.7% |
| Columbia Seligman Global Technology (CSGZX) | 1.02% | 20.6%. |
| Vanguard Information Technology Index Admiral Shares (VITAX) | 0.10% | 20.3% |
| Janus Henderson Global Technology and Innovation Fund (JATIX) | 0.76% | 18.9% |
| Fidelity Blue Chip Growth Fund (FBGRX) | 0.48% | 17.5% |
| Baron Partners Fund (BPTRX) | 2.24% | 16.7% |
| JPMorgan Large Cap Growth Fund (OLGAX) | 0.94% | 16.8% |
| Fidelity Growth Discovery Fund (FDSVX) | 0.67% | 15.9% |
| Calvert Equity Fund (CSIEX) | 0.91% | 12.9% |
Fidelity Select Semiconductors Portfolio (FSELX)
Net expense ratio: 0.65% 10-year average return: 27.7%
The last decade has been meteoric for the semiconductor industry. Between the mobile revolution, the explosion of cloud computing and the emergence of the Internet of Things, global demand for computer chips has skyrocketed. The rapid rise of artificial intelligence, propelled by tools like ChatGPT, suggests the trend can continue over the next decade. It’s no surprise, then, that a semiconductors fund would top the list of best performing 401(k) funds.
The Fidelity Select Semiconductors Portfolio is an alluring fund to play the trend, ranking as one of the best-performing mutual funds of the decade with an average annual return of 27.7%.
Some of the fund’s top holdings are household names like Nvidia Corp. (NVDA) and NXP Semiconductors NV (NXPI), but the fund’s portfolio manager isn’t afraid to venture outside of the U.S., with about 6% of the fund’s assets invested in Taiwan and the Netherlands each.
However, conservative investors should approach with caution. The semiconductor industry is highly cyclical, often experiencing sharp price whipsaws dictated by the ebb and flow of global chip supply and demand. This makes FSELX a compelling choice for younger investors who can afford to ride out significant drawdowns.
Columbia Seligman Global Technology Fund (CSGZX)
Net expense ratio: 1.02% 10-year average return: 20.6%.
Semiconductors aren’t the only segment of the technology industry that has done well recently. The entire tech industry has been on a tear, as evidenced by the second best-performing 401(k) fund on this list: Columbia Seligman Global Technology Fund.
It invests in global technology companies of all sizes to create a diversified portfolio. Companies are weighted based on the managers’ convictions with the largest holdings representing the ones the team has the most faith in. Currently, this consists of global tech giant Broadcom Inc. (AVGO), semiconductor company Lam Research Corp. (LRCX) and Microsoft Corp. (MSFT).
While the class A shares carry a hefty sales charge of 5.75%, you won’t encounter that if you invest in the fund inside your 401(k).
Vanguard Information Technology Index Admiral Shares (VITAX)
Net expense ratio: 0.1% 10-year average return: 20.3%
Here’s an example of a passive tech fund that’s well worth considering. The Vanguard Information Technology Index can operate on a low 0.1% expense ratio by tracking a U.S. information technology index. The high 20.3% 10-year return proves that just jumping on the tech bandwagon is enough to benefit from the industry’s growth.
The fund holds more than 300 stocks across all 13 technology sectors identified by the Global Industry Classification Standard (GICS). Top names include ones you’re likely familiar with, including Microsoft, Apple Inc. (AAPL) and Nvidia. But you’ll also encounter some lesser-known companies, like Dublin-based Accenture PLC (ACN) and California software company ServiceNow Inc. (NOW). This makes VITAX a solid, all-around information technology fund for your 401(k).
Janus Henderson Global Technology and Innovation Fund (JATIX)
Net expense ratio: 0.76% 10-year average return: 18.9%
In addition to technology, the past decade has been kind to growth investors, as is often the case during bull markets. This has created a profitable duo for the Janus Henderson Global Technology and Innovation Fund, which bills itself as a global growth fund focused on “companies that create and benefit from advances in technology.”
It does this by pairing larger stakes in companies the fund managers believe to be resilient, meaning more well-established companies with lower business risk. The fund takes smaller positions in ones that have “optionality” — in other words, companies with the potential for high returns in specific circumstances.
This has led to a selective portfolio of only 67 companies, with the top ones you’ll likely recognize: Nvidia, Microsoft and Meta Platforms Inc. (META). A little farther down the list, you might find some newer names, such as Canadian software company Constellation Software Inc. (TSX: CSU) and American capital equipment company KLA Corp. (KLAC).
Given its smaller portfolio, the fund is top heavy, with more than half of its assets in the top 10 names. Nvidia and Microsoft, the top holdings, claim about 10.5% each. Which is to say, if you invest in JATIX, make sure you aren’t holding the same top names in other funds to avoid overconcentration.
[See: 7 Best High-Yield Dividend Stocks to Invest In]
Fidelity Blue Chip Growth Fund (FBGRX)
Net expense ratio: 0.48% 10-year average return: 17.5%
There’s a name for many of the companies that keep reappearing in the top holdings lists of many of these funds: blue chip.
Blue-chip companies are large firms that are well established and well capitalized. They usually sell high-quality products or services that lead to strong brand reputations. Think Nvidia, Microsoft, Amazon.com Inc. (AMZN) and Apple, all of which top the holdings list for FBGRX.
To choose which blue-chip companies will go in FBGRX’s portfolio, the fund’s managers look for ones they believe to have above-average growth potential. In other words: blue-chip growth stocks. Currently, that puts the fund primarily in U.S. information technology companies, like the aforementioned names. But if the tech industry should fall out of favor, this fund, unlike purely tech ones, has the ability to pivot to other industries.
While this strategy has panned out over the past decade when both blue chips and technology companies thrived, it’s wise to pair this fund with other funds to get broader exposure to the overall market.
Baron Partners Fund (BPTRX)
Net expense ratio: 2.24% 10-year average return: 16.7%
Managed by billionaire investor Ron Baron, the Baron Partners Fund is a high-growth stock fund known for its bold and concentrated positions. Baron’s aggressive strategy is evident in the fund’s composition: It holds nearly 28% of its assets in Tesla Inc. (TSLA) stock.
Despite the fund’s more speculative nature, it has had an impressive track record, topping many mutual fund performance charts. Its 10-year return clocks in at 17% and 14.5% annually since its 1992 inception.
History suggests the performance could continue, but not without significant whipsaws. Its concentration in high-volatility stocks like Tesla means it takes a bigger hit from market declines. For instance, in 2008, it plunged by 46.6%, steeper than the S&P 500’s 37% decline. On the other hand, it skyrocketed by 148% in 2020, destroying the S&P 500’s 18% gain.
While Baron has a long-term track record on his side, the fund’s current portfolio relies on Tesla continuing to defy the odds and post market-leading returns, even with a gargantuan $5.6 billion in assets.
Given its volatile nature and high 2.24% expense ratio, the Baron Partners Fund is best reserved for a small, more speculative portion of your retirement portfolio.
JPMorgan Large Cap Growth Fund (OLGAX)
Net expense ratio: 0.94% 10-year average return: 16.8%
Investors often fall into two camps: value or growth. Value investors look for companies that are undervalued in the hopes of owning them until the market realizes their true worth. Growth investors opt for companies with — you guessed it — the greatest growth prospects. The JPMorgan Large Cap Growth Fund is for these latter investors.
The fund invests in the fastest-growing companies in the U.S. that have competitive advantages and strong price momentum. It uses a fundamental analysis approach to locate firms with “underappreciated growth potential.” This has helped it outperform the Morningstar large-cap growth category by 1.02% over the past decade and nearly 5% year to date.
It holds 67 stocks, the largest of which is Microsoft at more than one-tenth of the portfolio. This is followed by NVIDIA at 7.7% and Amazon at 7% of the portfolio. While this may sound like a technology fund portfolio — and it’s true that information tech represents more than 40% of the fund — you’ll also find companies from all industries except for utilities and real estate.
Fidelity Growth Discovery Fund (FDSVX)
Net expense ratio: 0.67% 10-year average return: 15.9%
The Fidelity Growth Discovery Fund has a straightforward strategy: Find stocks with above-average growth potential by evaluating key factors such as the company’s financial condition and industry position.
While primarily focused on U.S. stocks, including top holdings Microsoft, Nvidia and Amazon, the fund is willing to scour the globe for high-growth opportunities, holding investments in various international markets like the Netherlands, the United Kingdom and Taiwan.
The fund recently got a cost cut, dropping nearly 20 basis points from its expense ratio down to 0.67%, demonstrating Fidelity’s commitment to keeping costs low. This also makes it cheaper than many of its alternatives, making it worth a look for investors looking to add exposure to blue-chip growth stocks.
Calvert Equity Fund (CSIEX)
Net expense ratio: 0.91% 10-year average return: 12.9%
Rounding out this list of top-performing 401(k) funds is one that proves you can do good ethically and do well financially simultaneously. Calvert is an investment firm specializing in responsible investing with a 40-year history of helping investors pair their ethics and their investments.
The Calvert Equity Fund invests primarily in large-cap growth companies that have a history of consistent growth and stable earnings. On top of this, companies must meet Calvert’s environmental, social and governance (ESG) standards by minimizing exposure to risks associated with poor management in these areas.
This whittles the growth universe down to 46 names. Most of these companies are in the financial sector, followed closely by information technology and then health care. You’ll see a bit more diversity here than in the aforementioned funds. For example, top holdings include biotech company Thermo Fisher Scientific Inc. (TMO), American conglomerate Danaher Corp. (DHR) and national department store corporation TJX Companies Inc. (TJX). That said, Mastercard Inc. (MA), Microsoft and Google’s parent company, Alphabet Inc. (GOOG) also top the list.
Calvert doesn’t stop with choosing only the best ESG offerings, either. The firm is also a proponent of active engagement and uses all its proxy votes within the fund to further climate change and gender pay equality. So go ahead and invest with your head and your heart if that’s what makes you happy. It’s your future you’re investing in, after all.
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9 of the Best-Performing 401(k) Funds originally appeared on usnews.com
Update 06/10/24: This story was previously published at an earlier date and has been updated with new information.
