Do you ever wonder if the investment funds in your 401(k) plan are some of the very best mutual funds? If you are doing your part and saving as much as you can, shouldn’t you have access to the best mutual funds to grow your savings as much as possible?
How can you tell which are the best mutual funds?
Lee Conrad and Andrew Shilling recently published their list of the best mutual funds in FinancialPlanning. Here’s how they determined which funds were the best.
To develop their pool of candidates, Conrad and Shilling began by looking at the 20 largest mutual funds as measured by assets. Many believe that asset size is an excellent indicator of fund quality. It takes consistently good performance over time to build the amount of assets that the 20 largest mutual funds have accumulated.
But other factors besides solid performance have drawn investors to these funds. Each fund offers an appealing combination of risk, stable management and reasonable cost. And because their performance is consistently good, few investors flee these funds when markets fall.
After determining the 20 largest funds, Conrad and Shilling ranked each fund based upon performance. They felt that longer-term performance was more meaningful than short-term. As a result, they used a five-year period to rank the mutual funds under consideration.
The best mutual funds
All of the top 10 mutual funds come from just three fund families: American Funds, Fidelity and Vanguard. Half of the top 10 are from American Funds. Six of the 10 and three of the top four are actively managed. This may surprise those who think that index funds are the only way to invest.
Here is Conrad and Shilling’s top 10 list, in reverse order, with the associated five-year returns:
10. American Funds Capital World Growth & Income Fund: 10.80%
9. Vanguard Small Cap Index Fund: 12.92%
8. American Funds Washington Mutual Investors Fund: 14.36%
7. Vanguard Total Stock Market Index Fund: 14.67%
6. American Funds Investment Company of America Fund: 14.71%
5. Vanguard 500 Index Fund: 15.01%
4. American Funds Fundamental Investors Fund: 15.03%
3. Fidelity 500 Index Fund: 15.07%
2. American Funds Growth Fund of America: 16.15%
1. Fidelity Contrafund: 16.85%
It is hard for me to imagine that you wouldn’t have a number of these funds in your 401(k) plan. If you don’t have any, email the link to this piece to the human resources person in charge of your plan. Your fund lineup needs to be improved!
Robert C. Lawton, AIF, CRPS is the founder and President of Lawton Retirement Plan Consultants, LLC. Mr. Lawton is an award-winning 401(k) investment adviser with over 30 years of experience. He has consulted with many Fortune 500 companies, including: Aon Hewitt, Apple, AT&T, First Interstate Bank, Florida Power & Light, General Dynamics, Houghton Mifflin Harcourt, IBM, John Deere, Mazda Motor Corporation, Northwestern Mutual, Northern Trust Company, Trek Bikes, Tribune Company, Underwriters Labs, and many others. Mr. Lawton may be contacted at (414) 828-4015 or email@example.com.
Lawton Retirement Plan Consultants, LLC is a Milwaukee, Wisconsin-based independent, objective Registered Investment Adviser (RIA) providing investment advisory, fiduciary compliance, employee education, provider management and plan design services to 401(k) plan sponsors. The firm currently has contracts in place to provide consulting services on nearly a half billion in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or firstname.lastname@example.org or visit the firm’s website at: http://www.lawtonrpc.com. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, a plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges, and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice, and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.