These mutual funds are leaders in their asset classes and are solid choices for IRAs as well. If you can't buy exactly these funds, you may want to look for similar ones.
By Jeff Reeves, InvestorPlace
From http://money.msn.com/mutual-fund/
Best in class
Picking stocks is a difficult game, especially in this volatile market. But mutual fund investors with 401k plans don't necessarily have it any easier.
After all, they still have to decide which funds to buy -- and how much to put in them -- just like stock pickers. And sometimes the strategy and expenses can be just as confusing as dissecting an individual corporation's 10-K filing with the Securities and Exchange Commission.
If you're looking to take the guesswork out of your 401k in 2013, following are five individual funds that rank top of class. These mutual funds would be great additions to your 401k or even your individual retirement account, and each is representative of a specific asset class that I think you should invest in.
If you can't find these particular mutual funds in your 401k group, try to find the "flavor" in a similar investment. That way, even if you can't pick the exact list here you may be able to get similar returns in the new year.
For more on the best 401k funds for 2013, click through this slide show, published Dec. 12.
Index fund
What if you don't want to overthink and simply want to "buy the market" to get a piece of stocks in an easy and low-cost way? If that's the case, there's nothing better than an index fund, which, as the name implies, is a mutual fund that is locked into a benchmark and its constituent holdings.
Vanguard pioneered low-cost index funds, and its Vanguard 500 Index (VFINX) fund is one of the most popular products out there, with more than $25 billion under management and a rock-bottom 0.17% expense ratio. That's a mere $17 on every $10,000 invested!
Its holdings are those in the Standard & Poor's 500 Index ($INX) -- blue chips you know and love, such as Apple (AAPL) and General Electric (GE). It's easy to track your performance -- you simply watch the headline index; your fund will mirror its performance almost exactly.
Index funds are the bedrock of any good 401k because they are low-cost and because active managers have a hard time outperforming them. It might surprise you, but passive index funds regularly return more money to investors than do funds that rely on human beings picking stocks.
So don't get crazy or enamored with a manager or a strategy. An index fund keeps expenses down and performance up.
If you can't add this Vanguard fund, ask your 401k administrator for a similar index fund. Any good plan should provide these kinds of options to investors.
Small-cap growth fund
If you're a long-term investor with many years until retirement, one of the areas you might want to consider in your 401k next year is small-cap growth -- that is, smaller companies that have a lot of upside potential as they gain reach and scale. Small-cap companies can be profit powerhouses when they hit on a great new product, and even if there are some rocky market movements in 2013, you can expect smaller and more agile companies to get up to speed faster than lumbering blue chips.
Check your 401k plan for your personal small-cap growth fund options. If it's available, consider Janus Triton T (JATTX). It has earned a five-star rating from Morningstar, and its lifetime rate of return is about 11% annually.
Current holdings include machinery manufacturer Dresser-Rand (DRC), aircraft components supplier TransDigm Group (TDG) and software developer MSCI (MSCI).
Managers Brian Schaub and Chad Meade have been with the fund since 2006, so there is stability in strategy and leadership.
Janus also has no transaction costs and a reasonable expense ratio of 0.94%. That means its management fee is $94 for every $10,000 you invest.
Large-cap dividend fund
With U.S. Treasurys and investment-grade corporate bonds providing paltry yields, many investors have been looking to blue chips for income opportunities. After all, if you can get a 3% dividend in some of the most stable utility and consumer staples stocks, why settle for half that in bonds?
If you like the idea of bigger yields and don't mind the added risk of stocks, then a dividend fund should be part of your 401k holdings. One of the best -- and most widely held, with more than $2 billion in assets -- is the Fidelity Strategic Dividend and Income Fund (FSDIX).
This fund gets four stars from Morningstar. It has no transaction charges and an expense ratio of just 0.84%. That's an $84 charge on every $10,000 you have invested.
Additionally, the fund has a yield of about 2.5%, thanks to bedrock blue chips like Exxon Mobil (XOM), Verizon Communications (VZ) and Procter & Gamble (PG) in its holdings.
You can find other funds with more yield, but beware chasing large dividends in exchange for share-price declines. Fidelity Strategic Dividend and Income has a lifetime return of about 6% annually, so this is a fund that doesn't trade big dividends for underperforming stocks.
If you're concerned with income but don't want to take on undue risk, consider a large-cap dividend fund in 2013.
International growth fund
Global equity markets have seen tough times in recent years, with China in particular underperforming U.S. benchmarks like the S&P 500 Index ($INX). However, if you're a longer-term investor worried about making sure you find the right investments over the next decade, you should strongly consider investing in international growth. After all, the idea is to buy low and sell high -- not to wait for the rally and buy at the top.
One of the best international growth opportunities for 401k investors right now is the Oakmark International I (OAKIX) fund. This mutual fund has a lifetime return of more than 10% annually, a five-star ranking from Morningstar and an impressive $9 billion under management.
Because this is a "blend" fund that mixes both value and growth plays, there is some stability via international blue chips like Daimler (DDAIF), Credit Suisse (CS) and Canon (CAJ). So don't think you'll be taking a Hail Mary on the next Chinese startup with this fund.
Manager David G. Herro has been with the fund since 1992, and international equity experience is crucial to understanding global markets.
The expense ratio is a reasonable 1.06%, meaning you pay $106 for every $10,000 invested.
Bond fund
When you think about bond investing, one firm comes to mind above all others: Pimco, with its iconic manager, Bill Gross. So if it's offered, you should consider adding the Pimco Total Return C (PTTCX) fund in your 401k portfolio. This fund offers low-risk income as well as a steady foundation of growth.
Bonds are unlikely to outperform stocks, especially in this low-interest-rate environment. However, they are much more reliable in their returns -- especially when you have someone like Gross ranking the bonds based on where he can get the best yield without sacrificing a risk of default. Pimco Total Return C invests only up to 10% of its portfolio in junk bonds, which offer higher yield but greater risk, so this is one of the most stable income investments out there.
The expense ratio is a decent 1.6% -- about $160 on $10,000 invested -- and many participants must pay transaction fees. However, the performance of this fund is well above its peers and could be worth the price of admission.
If you can't add the this fund, however, I strongly advise having some kind of income fund via investment-grade bonds in your portfolio -- particularly if you are close to retirement and are as concerned about capital preservation as about growth.
By Jeff Reeves, InvestorPlace
From http://money.msn.com/mutual-fund/
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