Investors have gotten either lucky or complacent in recent years, depending on how you look at it. After benefiting from market concentration in mega-cap technology stocks, retirement investors are increasingly looking for broader diversification and steadier income sources inside their 401(k)s.
Year to date, several asset classes are outperforming U.S. large-cap stocks. Real estate investment trusts, small caps and international stocks, for example, are all showing better returns.
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It may be time to take a look at your 401(k) and be sure your money is allocated to a variety of investments, not just that tech fund or S&P 500 fund that’s played a starring role for so long.
Keep in mind: If you’re investing only in top-performing funds, that probably won’t deliver the return you need over time, as fund performance depends more on broad asset class returns than fund manager “magic.”
Here are some funds that may be worth a look for broad diversification:
| Fund | Expense Ratio | TTM Yield* | 10-Year Return** |
| Vanguard Wellington Fund (ticker: VWELX) | 0.24% | 2.0% | 10.2% |
| American Funds EUPAC Fund (AEPGX) | 0.83% | 2.6% | 9.2% |
| Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) | 0.04% | 4.0% | 1.7% |
| Fidelity Contrafund (FCNTX) | 0.74% | 0% | 17.7% |
| Vanguard Target Retirement 2030 Fund (VTHRX) | 0.08% | 2.5% | 9.1% |
| Dodge & Cox Stock Fund (DODGX) | 0.51% | 1.2% | 12.8% |
| Fidelity Select Gold Portfolio (FSAGX) | 0.64% | 4.9% | 13.1% |
| Vanguard Primecap Investor Shares (VPMCX) | 0.35% | 0.8% | 17.6% |
| Vanguard Equity Income Fund (VEIPX) | 0.26% | 2.1% | 11.9% |
*Trailing-12-month yield.**10-year total return, annualized as of May 27.
Vanguard Wellington Fund (VWELX)
This fund has been a stalwart for decades and holds $121.3 billion in assets. It invests about 60% to 70% of its money in stocks of large, established companies, mostly dividend payers.
Managers look for companies that appear undervalued but have room to grow, which is the classic value investing approach. The rest of the portfolio leans on investment-grade corporate bonds, with some exposure to Treasurys, agency bonds and mortgage-backed securities.
“Investors benefit from significant liquidity and active management at a low 24-basis-point expense ratio,” says Andrew Izyumov, a chartered financial analyst (CFA) and co-founder of investment platform 8Figures.
“VWELX serves well as a core, conservative holding for those seeking steady, moderate growth and capital preservation without frequent rebalancing,” he says.
American Funds EUPAC Fund (AEPGX)
American Funds are staples of many 401(k) plans. This one has $136.6 billion in assets, reflecting that popularity. This is another fund with a value tilt; it invests in companies in developed and emerging markets that stand to benefit from innovation, global economic growth, increasing consumer demand or a turnaround in business conditions.
Investors looking for non-U.S. exposure may want to consider this one, as 92% of the fund consists of stocks outside the U.S. About 90% of the stocks are large caps.
The international sleeve of a diversified portfolio has lagged for years, which makes this one a tough sell for many investors.
“These are decent managers and they focus on quality growth names overseas. Still, currency moves and geopolitical risks are significant,” says Jörn Kleinhans, a CFA and enrolled agent who’s a tax and investment strategist at Scorpio Tax Management in Orange County, California.
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)
A core holding in U.S. bonds is a common addition to many portfolios.
This fund tracks a broad benchmark covering investment-grade, taxable U.S. bonds with maturities over one year. That includes government debt, corporate bonds, and mortgage- and asset-backed securities.
The average maturity of the fund’s holdings is in line with the index’s current 5-to-10-year maturity range.
As with other Vanguard funds, this one has a low expense ratio; in this case it’s 0.04%, making it one of the lowest-cost ways to get broad U.S. bond exposure. For investors who want fixed-income coverage without active management fees, it’s a practical default.
For non-401(k) investors, it’s also available in an exchange-traded fund wrapper, as the Vanguard Total Bond Market ETF (BND).
Fidelity Contrafund (FCNTX)
Yes, large-cap growth has been the star of the past decade. This fund is generally categorized as large growth, although it also invests in value stocks, with an aim to outperform its benchmark, the S&P 500.
As you might expect, that means plenty of overlap with the biggest S&P 500 names. Top holdings include Meta Platforms Inc. (META), Nvidia Corp. (NVDA), Amazon.com Inc. (AMZN), Berkshire Hathaway Inc. (BRK.A) and Alphabet Inc. (GOOGL).
Over the past year, this actively managed fund is lagging its benchmark but has topped S&P 500 performance over rolling three-, five-, 10- and 15-year periods. Part of the fund’s long-term outperformance is due to the manager’s ability to overweight fast-growing sectors and companies before they become dominant parts of the index.
“It shines when tech is running hot and the recent numbers still look pretty good,” Kleinhans says. “The downside is, it can really suffer when growth stocks fall out of favor. It’s fine for clients who can handle volatility and want growth exposure, but likely best to not pile in right now with big tech valuations looking expensive, even amid the current sell-off,” he adds.
Vanguard Target Retirement 2030 Fund (VTHRX)
This Vanguard target-date fund is designed to match the risk levels and return projections suitable for someone planning to retire in 2030. Its glide path automatically shifts the portfolio toward bonds and away from stocks as the target date approaches. It currently holds about 60% stocks and 40% bonds.
For reference, the Vanguard Target Retirement 2050 Fund (VFIFX) holds about 90% stocks and 10% bonds. The 2050 fund has outperformed the 2030 fund, but a key concept behind target-date funds is risk management. A fund holding a greater proportion of stocks will return more over time but also has more risk, which is not something that’s especially desirable for those nearing retirement.
“Investors with higher risk tolerance or additional assets may find it too conservative as the target date nears,” Izyumov says. “VTHRX is well-suited for hands-off investors seeking automatic risk management aligned with their retirement timeline.”
[Read: The 7 Best Fidelity Mutual Funds to Buy and Hold]
Dodge & Cox Stock Fund (DODGX)
This is an actively managed value stock fund targeting long-term growth. The manager screens for medium- to large-cap U.S. companies that appear undervalued relative to their long-term fundamentals.
It also invests up to 20% of the portfolio in non-U.S. stocks that are outside the S&P 500 index, but nearly all must trade in dollars, keeping the fund’s currency risk tightly contained.
The portfolio holds about 85 stocks, turns over slowly at 20% annually, and carries a forward price-to-earnings ratio of 13.8, well below the S&P 500’s 21.1 (FactSet, May 21). That’s in keeping with this fund’s emphasis on value.
“When the market eventually rotates away from the big tech names, this kind of fund often catches up,” Kleinhans says. “It’s had more volatility than some peers, but the portfolio looks reasonably cheap. It’s a solid pick if you’re concerned about how concentrated the S&P has gotten.”
Fidelity Select Gold Portfolio (FSAGX)
This fund may be suitable for investors who want targeted exposure to gold and precious metals as a safe haven or hedge against stock-market downturns. At least 80% of assets go into stocks of companies involved in gold exploration, mining, processing or distribution, with the remainder available for silver, platinum, and other precious metals and minerals.
The three largest holdings are Agnico Eagle Mines Ltd. (AEM), Newmont Corp. (NEM) and Wheaton Precious Metals Corp. (WPM).
“Performance of the FSAGX has been excellent recently due to low real interest rates and purchases by central banks, but the fund should not be treated as just another way of making money,” says Steve Maitland, lead researcher at Maitland Wealth in Wilmington, Delaware.
Maitland points out that the fund’s managers use a bottom-up approach, wherein they invest in quality mining and royalty-stream stocks.
“Most importantly, it also serves as a non-correlated shock absorber, providing this portfolio insurance at a very economical expense ratio of 0.64%,” he says.
Vanguard Primecap Investor Shares (VPMCX)
This fund, with $82 billion in assets, invests in large- and mid-cap stocks that managers deem to have above-average earnings growth potential not reflected in their current prices. It’s outperforming its S&P 500 benchmark by about 13 percentage points year to date.
The reason for this is sector concentration. The fund’s top holdings are Eli Lilly and Co. (LLY) and Micron Technology Inc. (MU), which have been strong performers this year and are more heavily weighted in this fund than in the S&P.
The fund runs a growth tilt with heavy exposure to health care and technology, and those sector bets are paying off this year.
“It’s one of the stronger active large blend funds I’ve seen,” Kleinhans says. “Good stock picking, low turnover, long horizon. It has a strong track record over many years.”
VPMCX has a minimum investment of $3,000.
Vanguard Equity Income Fund (VEIPX)
Steady income is a key component of a retirement portfolio. This fund is designed to generate higher-than-average dividend yield by investing in slower-growing companies whose total return may lag in a strong bull market.
That means investors really need to understand what they are buying, and not expect this fund to compete with others with a growth emphasis. According to Vanguard, “This income-focused fund may be appropriate for investors who have a long-term investment goal and a tolerance for stock market volatility.”
This fund’s trailing-12-month yield is 2.1% and its expense ratio is 0.26%.
The fund has lagged its benchmark, the FTSE High Dividend Yield Index. According to managers’ own quarterly commentary, that discrepancy is due to weak stock selection in information technology and consumer staples, as well as being underweight in energy, which has soared recently.
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9 of the Best-Performing 401(k) Funds originally appeared on usnews.com
Update 05/28/26: This story was previously published at an earlier date and has been updated with new information.
