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 indexes 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 10% of U.S. mutual funds outperform the broader U.S. equity market 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 10 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% | 26.8% |
| Fidelity Advisor Technology Fund (FATIX) | 0.68% | 21.3% |
| Vanguard Information Technology Index Fund (VITAX) | 0.1% | 20.7% |
| Putnam Global Technology Fund (PGTYX) | 0.86% | 20.8% |
| Columbia Seligman Global Technology Fund (CSGZX) | 1.02% | 20.3% |
| BlackRock Technology Opportunities Fund (BGSIX) | 0.92% | 20.2% |
| Columbia Seligman Technology & Information Fund (SCMIX) | 0.89% | 20% |
| Fidelity Growth Company Fund (FGCKX) | 0.62% | 19% |
| Fidelity Advisor Growth Opportunities Fund (FAGCX) | 0.44% | 18.3% |
| Fidelity Blue Chip Growth Fund (FBGRX) | 0.47% | 17.7% |
Fidelity Select Semiconductors Portfolio (FSELX)
Net expense ratio: 0.65% 10-year average return: 26.8%
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 continue to top the list of best-performing 401(k) funds, as it has for the past year.
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 26.8%. It also gets five stars from Morningstar and ranks highly on U.S. News & World Report’s best technology funds list. Morningstar also gives it a bronze badge, indicating the analysts are confident it will continue to outperform in the near future.
Some of the fund’s top holdings are household names like Nvidia Corp. (NVDA), but the fund’s portfolio manager isn’t afraid to venture outside of the U.S., with nearly 13.5% of the fund’s assets invested in foreign companies. Over 8% are based in Taiwan, and nearly 4% are in the Netherlands. There’s even token representation in Israel.
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.
Fidelity Advisor Technology Fund (FATIX)
Net expense ratio: 0.68% 10-year average return: 21.3%
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: FATIX.
The fund invests in companies that produce or will produce products or services that either provide or benefit from technological advances, like Nvidia, Apple Inc. (AAPL) and Microsoft Corp. (MSFT).
Its portfolio of 86 holdings is quite concentrated, with 75% of assets in the top 10 names and nearly 91.5% in the top 20. Nvidia alone accounts for more than one-fifth of the portfolio. So if you buy this fund, double check you’re not doubling down on the same names elsewhere in your portfolio to avoid overconcentration risk.
FATIX also gets five stars and a bronze badge from Morningstar.
The Class I designation indicates this version of the fund is only available to institutional investors. In other words, you may find it in your 401(k), but it won’t be available in your individual retirement account.
Vanguard Information Technology Index Fund (VITAX)
Net expense ratio: 0.1% 10-year average return: 20.7%
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 20.7% 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 12 technology sectors, from semiconductors to technology distributors. Top names include ones you’re likely familiar with, including Apple, Microsoft and Nvidia. But you’ll also encounter some lesser-known companies, like Dublin-based Accenture PLC (ACN). This makes VITAX a solid, all-around information technology fund for your 401(k).
Morningstar is also bullish on the fund. The analysts give it top marks with five stars and a gold badge, indicating they have the highest conviction it will outperform in the near future. It also gets five out of five globes for sustainability.
Putnam Global Technology Fund (PGTYX)
Net expense ratio: 0.86% 10-year average return: 20.8%
The Putnam Global Technology Fund is what the name promises: a fund that invests in technology companies from around the globe. That said, it’s still over 80% in the U.S. It seeks both emerging and established companies that the managers believe will benefit from technological advancements and disruptions.
PGTYX inches ahead of other global technology funds on this list in terms of 10-year performance and price, but Morningstar’s analysts are not optimistic about its future. It gets five stars but a negative medal rating. The primary driver of the poor medal rating is the parent company’s inferior risk-adjusted performance, according to the analysts.
PGTYX is considered “very aggressive” by Morningstar, so if you’re not prepared for a bumpy ride, this likely isn’t the fund for you. It may be worth paying a bit more in fees for a fund with higher ratings — such as the next option on this list.
Columbia Seligman Global Technology Fund (CSGZX)
Net expense ratio: 1.02% 10-year average return: 20.3%
The Columbia Seligman Global Technology Fund has also benefited from the tech favoritism playing out in the stock market lately.
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), Nvidia and Apple.
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).
[Read: Where to Find Free Professional Financial Advice]
BlackRock Technology Opportunities Fund (BGSIX)
Net expense ratio: 0.92% 10-year average return: 20.2%
Hopefully you aren’t tired of comparing technology funds yet, because here’s another top-performing tech 401(k) fund.
BGSIX invests in global companies with “rapid and sustainable growth potential from the development, advancement and use of science and/or technology.” This means a lot of semiconductor, software and hardware companies, but also some sectors you might not expect. For instance, nearly 9% of the portfolio is in media and entertainment companies. And over 1% is in autos and components.
Of course, the top holdings are still the same old tech giants, like Nvidia, Microsoft and Apple. These behemoths make up a good portion of the portfolio, over half of which is in the top 10 names. Nearly 14.5% is in Nvidia alone.
But Morningstar gives it four stars and a gold badge, which indicates the analysts have the highest conviction that this fund will outperform over a market cycle.
Columbia Seligman Technology & Information Fund (SCMIX)
Net expense ratio: 0.89% 10-year average return: 20%
The Columbia Seligman Technology & Information Fund is open to tech companies of all sizes. Its selective portfolio can contain anywhere from 50 to 75 companies the managers view as being undervalued or misunderstood based on a growth-at-a-reasonable-price (GARP) analysis.
This can be seen in the fund’s lower price-to-earnings (P/E) ratio, which indicates how much investors are paying for $1 of a company’s earnings. SCMIX has a P/E of 27.45 compared to 35.90 for the S&P North American Technology Sector Index.
There are a few different institutional share classes of this fund that could be offered in your retirement plan, with expense ratios that range from 0.85% to 0.93%. If you try to buy this fund outside of your 401(k), you may get hit with a sales charge and much higher expense ratio.
Fidelity Growth Company Fund (FGCKX)
Net expense ratio: 0.62% 10-year average return: 19%
Here at last: a top-performing 401(k) fund that isn’t a tech fund. At least, in theory.
The Fidelity Growth Company Fund is designed to invest in companies from around the world that the managers believe have above-average growth potential. This gives them free rein to not only scour the globe, but also all the stock market sectors for the best growth companies.
Apparently, over 48% of those global growth companies can be found in the information technology sector. And over 96% of them reside in the U.S. So while this is a broad-based large-cap fund in theory, in reality, you’ll get a lot of overlap with the other tech funds on the list. But this is partly why FGCKX has done so well.
FGCKX has been one of the best-performing large-growth funds in the Morningstar category over not only the past year, but also the five-, 10- and 15-year periods. Given its five-star and gold-badge rating from Morningstar, it appears the analysts expect more great things from this fund.
Fidelity Advisor Growth Opportunities Fund (FAGCX)
Net expense ratio: 0.44% 10-year average return: 18.3%
The Fidelity Advisor Growth Opportunities Fund does as the name suggests: It looks for companies the fund managers feel have above-average growth potential. This means the fund seeks capital appreciation, rather than income, which can be a good objective for retirement investors with long time horizons.
It achieves this objective with a portfolio of nearly 200 growth companies, almost half of which are information technology firms. This shouldn’t be surprising given the meteoric rise of these companies over the past decade.
The fund also invests over 20% of its assets in communication services, nearly 11% in consumer discretionary firms and nearly 8% in health care companies. So, you do get some diversification here. This means you’ll find names like pharmaceutical company Eli Lilly & Co. (LLY) and car-buying platform Carvana Co. (CVNA) alongside Nvidia and Microsoft in the top 10 names.
Fidelity Blue Chip Growth Fund (FBGRX)
Net expense ratio: 0.47% 10-year average return: 18.3%
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, Apple, Microsoft and Amazon.com Inc. (AMZN), 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 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.
It gets five stars and a silver badge from Morningstar.
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10 of the Best Performing 401(k) Funds of the Past Decade originally appeared on usnews.com
Update 10/31/24: This story was previously published at an earlier date and has been updated with new information.
