The 7 Best Mutual Funds for Your 401k

Mutual funds offer a lot of advantages to investors, particularly for retail investors who may have limited time, a low appetite for risk and only a passing knowledge of how the stock market works. People wanting to put away their hard-earned money for retirement often choose these, as they give exposure to a large bundle of stocks that provide a greater margin of safety than individual stocks.

Industry data shows mutual funds remain one of the most popular investment vehicles for Americans. 45% of households in the U.S. owned shares in at least one mutual fund in 2021, according to Statista. They can also be a great way for investors to ride out market downturns such as the one we’re experiencing this year given their diversification, low fees and relative security. Many mutual funds also pay regular dividends to investors.

With that, here are seven of the best mutual funds to hold in a 401k account.

BACIX BlackRock Energy Opportunities Fund $11.79
VFIAX Vanguard 500 Index Fund Admiral Shares $380.97
OPGSX Invesco Gold and Precious Minerals Fund $20.67
VEUAX JPMorgan Europe Dynamic Fund $24.85
PRMSX T. Rowe Price Emerging Markets Stock Fund $35.89
GVALX Gotham Large Value Fund $14.28
VITAX Vanguard Information Technology Fund $190.25

Best Mutual Funds for Your 401k: BlackRock Energy Opportunities Fund (BACIX)

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Although oil and natural gas prices have come down in recent weeks and are off the highs seen earlier this year, the energy sector remains the lone bright spot in an otherwise down market this year. The S&P 500 Energy Index is up more than 30% year-to-date, compared with a 12% decline in the broader S&P 500 benchmark index.

Investors looking for gains in the current doom and gloom market need to have exposure to the energy sector. The BlackRock Energy Opportunities Fund (MUTF:BACIX) provides the perfect balance of oil and natural gas stocks. The top holdings in the fund include stocks of leading companies such as Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX) and Shell (NYSE:SHEL).

BACIX also gives investors exposure to leading oil and gas companies in Canada, Europe and Asia. It covers the full production cycle of oil and natural gas products, from exploration and drilling to refining and oil services. The mutual fund also pays an annual dividend and charges an annual fee of 1.33%, which is reasonable.

In the last 12 months, the Energy Opportunities Fund has gained more than 40% and currently trades at $11.79 per unit. With a top-rated four stars from Morningstar, this energy fund is a great way for investors to play the current boom in oil and natural gas stocks.

Vanguard 500 Index Fund Admiral Shares (VFIAX)

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Vanguard is one of the biggest investment management companies in the world, second only to BlackRock (NYSE:BLK). Started by John Bogle in 1975, Vanguard today has more than $7 trillion of assets under management. The Pennsylvania-based company offers a mix of exchange-traded funds (ETFs) and mutual funds.

One of its most popular investment vehicles is its 500 Index Fund Admiral Shares (MUTF:VFIAX). This is a fund that tracks the performance of the benchmark S&P 500 index. Specifically, it provides investors with exposure to the 500 biggest U.S. companies that account for 75% of the U.S. stock market’s value.

In addition to giving investors diversification and broad exposure to the overall market, Vanguard funds are notoriously inexpensive to own. Vanguard prides itself on offering some of the lowest fees in the global fund industry. VFIAX’s expense ratio is currently 0.04%, which is rock bottom for a mutual fund.

The top holdings in the 500 Index Fund, mirroring the weighting in the S&P 500 index, include stocks of companies such as Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) and UnitedHealth Group (NYSE:UNH). The fund’s performance is identical to that of the S&P 500 index. However, over the past decade, the fund has gained more than 13%, again matching the S&P 500. Plus, this fund pays a quarterly dividend of $1.43 per share.

Best Mutual Funds for Your 401k: Invesco Gold and Precious Minerals Fund (OPGSX)

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Mining can be a tough game. Companies large and small scour the earth in search of precious metals to be extracted from the ground. This often takes them into inhospitable locations and requires large amounts of upfront capital investment. As such, it can be difficult for investors to distinguish winners and losers among stocks of mining companies.

Atlanta-based investment management company Invesco (NYSE:IVZ) aims to simplify things for investors with its Gold and Precious Minerals Fund (MUTF:OPGSX). This four-star rated fund invests in leading mining companies that provide exposure to gold and other precious metals.

Holdings in the OPGSX fund include global mining giants such as Newmont (NYSE:NEM), Barrick Gold (NYSE:GOLD), and Ivanhoe Mines (OTCMKTS:IVPAF), among many others. The fund is one of the older picks on this list, having been created in 1983.

Today, it has $1.77 billion of total assets, and while it is down 23% this year amid broad market volatility, the Gold and Precious Minerals Fund has gained 6% over the past five years. It also charges a comparatively low management fee of 0.58%, and provides investors with an annual dividend that paid out 93 cents per unit last December.

JPMorgan Europe Dynamic Fund (VEUAX)

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Investors looking for exposure abroad should consider the Europe Dynamic Fund (MUTF:VEUAX) from leading commercial bank JPMorgan Chase (NYSE:JPM). The fund invests in a wide range of large and small companies that are located in Western Europe, as well as emerging Eastern European countries.

The fund holds a total of 68 stocks, including securities of leading companies such as food giant Nestle (OTCMKTS:NSRGY), pharmaceutical company Nova Nordisk (NYSE:NVO), and oil major BP (NYSE:BP). Much of the portfolio is comprised of leading European companies with a track record of strong performance.

While the Europe Dynamic Fund is down 19% so far this year, it has gained 6% over the past decade and grown considerably since its inception in 1995. The management expense fees are a little higher at 1.26%, but in line with similar mutual funds.

Like the other funds on this list, the Europe Dynamic Fund pays an annual dividend that amounted to 62 cents per unit last December. Investors should be aware this fund requires a minimum investment of $1,000 and that European markets have been particularly volatile this year following Russia’s invasion of Ukraine in February.

Best Mutual Funds for Your 401k: T. Rowe Price Emerging Markets Stock Fund (PRMSX)

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Another mutual fund started in 1995 is T. Rowe Price’s Emerging Markets Stock Fund (MUTF:PRMSX). This is a fund that seeks to provide investors with exposure to companies in developing markets, primarily China (33%), Brazil (8%) and South Korea (13%).

The fund’s management fee of 1.21% is consistent with other mutual funds, and the portfolio includes shares of companies such as Taiwan Semiconductor (NYSE:TSM), Samsung and Alibaba (NYSE:BABA). The fund is up 74% since its inception more than 25 years ago, but is down more than 20% this year due to the ongoing market churn.

While heavily weighted toward Asia, the Emerging Markets Stock Fund does give investors some exposure to South America, mainly Brazil. However, unlike other funds on this list, PRMSX does not pay a dividend. While the lack of a dividend might be a drawback for some investors, it’s important to keep in mind the fund does offer access to some of the largest and best-performing companies in China and throughout Southeast Asia. As with other mutual funds noted in this article, T. Rowe Price’s Emerging Markets Stock Fund requires a minimum investment of $1,000.

Gotham Large Value Fund (GVALX)

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Founded and managed by famed value investor Joel Greenblatt, Gotham Funds is a boutique mutual fund company that offers a handful of investment vehicles. One of them is the Gotham Large Value Fund (MUTF:GVALX), which takes long positions in leading, established companies in the S&P 500 index.

Holdings are chosen based on their size, or market capitalization, and include major U.S. companies such as Meta Platforms (NASDAQ:META), Intel (NYSE:INTC), and General Electric (NYSE:GE). The fund has been a strong performer since its inception in 2015, returning 108% to investors in the past seven years.

Even this year, the mutual fund is performing better than the market, down just 7% or half the 14% decline seen in the S&P 500 index. The Gotham Large Value Fund also doesn’t pay a dividend and is clearly targeting high-net-worth individuals, as the minimum investment is $100,000. Still, for people who have the means, this is a solid mutual fund that focuses on value investing for the long-term and has a track record of beating the broader stock market. The fund is also well diversified and gives investors access to stocks in sectors ranging from industrials and financials to health care and real estate.

Best Mutual Funds for Your 401k: Vanguard Information Technology Fund (VITAX)

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When it comes to growth, technology stocks are still likely to lead the way over the long term. And a mutual fund that focuses exclusively on stocks of technology companies can be a great way for investors to gain exposure to the sector while diversifying their portfolio and offering a moat of safety. Vanguard’s Information Technology Fund (MUTF:VITAX) is a great option for people wanting access to leading high growth tech stocks. Top holdings in the fund include Apple, Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA) and Adobe (NASDAQ:ADBE), to name only a couple.

While the tech sector is down this year, leading the VITAX to a 19% loss this year. However, the fund has gained more than 20% over the past five years. Like all Vanguard mutual funds, the Information Technology Fund comes with rock bottom fees of just 0.10%, which is about a tenth of the fees charged by competing mutual funds.

This fund also pays a quarterly dividend of 30 cents per unit held, which is decent and should help investors when markets are going through a difficult period, as is the case this year. In total, the fund holds 379 technology stocks of companies large and small, and there is no minimum investment requirement.

On the date of publication, Joel Baglole held long positions in AAPL, MSFT and NVDA. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.  

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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