Best 401(k) investments of 2024

FXAIX is a popular mutual fund inside and outside 401(k)s. It tracks the S&P 500, a well-known index of 500 of the largest U.S. companies, including Apple Inc. (AAPL), Microsoft (MSFT) and Alphabet (GOOGL). More than 29% of the fund’s portfolio is in tech stocks, so make sure you pair it with funds that offer greater exposure to other sectors for balance.

With an expense ratio of only 0.015%, this fund is not only one of the best 401(k) investments but also one of the cheapest. A low portfolio turnover rate of 2% also helps keep costs low, as the fund will incur fewer trading expenses. This is important because even a slight increase in your investment expenses can greatly impact your long-term returns.

• 10-year return as of June 30: 12.85%.

VMCIX tracks the CRSP U.S. Mid Cap Index, which targets companies representing 70% to 85% of U.S. market capitalization, although VMCIX’s portfolio does include a few foreign holdings. The portfolio holds over 340 stocks with a median market cap of $39.74 billion. Industrial stocks represent the largest share of the portfolio, but even this is only around 17%. Similarly, the largest holding accounts for less than 1% of the portfolio’s assets, indicating it is well diversified across these names.

VMCIX is categorized as an aggressive fund by Vanguard, meaning it is subject to wide share price fluctuations and may be suitable for people with investing horizons of 10 years or longer, according to the company.

• 10-year return as of June 30: 9.11%.

As the name implies, VSMSX tracks the S&P SmallCap 600, an index that measures the performance of 600 smaller U.S. companies. To be included in the index, a company must have an unadjusted market cap between $1 billion and $6.7 billion. And that’s just one of several requirements.

Small-cap stocks can be good 401(k) investments because of their superior growth potential. It’s easier to grow quickly when you’re small than when you’re the size of Apple. But small-cap stocks are also riskier than large-cap stocks because it’s easier to fall out of favor with investors or go out of business when you don’t have a big market share.

That’s one reason Vanguard classifies VSMSX as an aggressive fund, noting that while it offers high potential for investment growth, the share value may rise and fall more sharply. Thus, VSMSX is best for investors with investing horizons of at least 10 years.

• 10-year return as of June 30: 8.22%.

TCIEX is a great option for adding international stocks to your 401(k) portfolio. It provides exposure to more than 800 stocks with a low expense ratio of 0.05%. It tracks the MSCI EAFE Index, which includes nearly 800 large- and mid-cap companies from 21 developed market countries.

Just over a fifth of the portfolio’s total assets are in Japan, followed by the U.K. and France. Financials represent the highest sector weight at more than 18%. TCIEX does a great job of staying diversified. Its largest holding, Nestle, accounts for about 2% of the portfolio.

• 10-year return as of June 30: 4.47%.

PIMCO is known for being a leading fixed-income investment provider, so it’s no surprise that its income fund is among the best bond funds for 401(k) investors. PIMIX tracks the Bloomberg US Aggregate Index, which covers the entire U.S. fixed-rate bond market, including government and corporate bonds, mortgage pass-through securities, and asset-backed securities.

PIMIX holds over 7,000 bonds with an effective duration of just over three years. Duration measures how sensitive a bond or portfolio of bonds is to interest rate changes. A shorter duration means the portfolio is less sensitive to these changes and, thus, less likely to be volatile. PIMIX’s relatively short duration, coupled with nearly 40% of its assets being in government bonds, makes it a fairly stable bond investment. It could also appeal to retirees looking for income, as it pays a monthly dividend.

• 10-year return as of June 30: 3.98%.

Before getting into RFKTX, it’s worth noting that the best target-date fund will vary by investor. In the case of RFKTX, that’s 2055. If you’re not planning to retire in or around that year, look for that version of this fund closer to your target retirement year.

We chose American Funds as the best target-date 401(k) investment option because of its strong quantitative research. More than 90% of the assets in the portfolio are Morningstar Medalist securities. RFKTX is a fund of funds, using a portfolio of actively managed mutual funds to create the desired mix of growth, income and capital preservation. As the target retirement year approaches, the fund increasingly focuses on income and capital conservation to help near-retirees manage risk. That makes it a great option for hands-off investors.

• 10-year return as of June 30: 9.11%.