Ranking Biggest 401(K) Stock And Bond Funds

Apr 9, 2024 | 401K, 401K, 403B, ETFs, Investing, Investments, Mutual-Funds, Newsletter

Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.

Regular AAC (Asset Allocation Composite), SAA, and TAA portfolios are always rebalanced on the first trading day of a month. the next re-balance will be on Wednesday, May 1, 2024. 

As a reminder to expert users: advanced portfolios are still re-balanced based on their original re-balance schedules and they are not the same as those used in Strategic and Tactical Asset Allocation (SAA and TAA) portfolios of a plan.

Ranking Biggest 401(K) Stock And Bond Funds

In this newsletter, we look at the biggest 401(k) stock and bond funds and compare their returns using a similar rolling return methodology we discussed in our previous newsletter Rolling Returns: A Better Way To Evaluate & Compare Investments. 

Before we go on, we have received several readers’ emails asking about the rolling returns methodology. We want to emphasize that rolling returns are more useful for evaluating the long-term behavior of an investment (ETF, mutual fund, or even stock), It’s not a substitute for momentum scores that are more or less measuring near and intermediate-term price (total return) performance. Similarly, the discussion in this newsletter falls into the long-term performance evaluation category. 

Biggest 401(k) stock and bond funds

Based on our own extensive 401(k) plan database that includes all ERISA retirement plans including 403(b), we identify the following funds as the biggest (or most popular) stock and bond funds. By biggest we mean they have the biggest asset sizes. 

The best biggest stock funds in 401(k) plans

The following table shows the latest returns for the top 8 stock funds with the biggest asset under management in 401(k) and other retirement plans:

8 Biggest stock funds in 401(k) plans (as of 4/5/2024)
Ticker/Portfolio Name YTD
Return**		 1Yr AR 3Yr AR 5Yr AR 10Yr AR 15Yr AR 20Yr AR
AGTHX (GROWTH FUND OF AMERICA CLASS A) 12.4% 40.6% 6.5% 14.1% 13.2% 14.8% 10.4%
DODGX (DODGE & COX STOCK FUND DODGE & COX STOCK FUND) 7.3% 24.5% 9.3% 12.8% 11.0% 14.7% 9.2%
FCNTX (Fidelity Contrafund) 19.2% 48.9% 11.8% 18.8% 15.8% 16.9% 12.6%
FDGRX (FIDELITY GROWTH COMPANY FUND FIDELITY GROWTH COMPANY FUND) 14.0% 45.9% 8.9% 20.8% 18.4% 19.7% 14.1%
VPMCX (VANGUARD PRIMECAP FUND INVESTOR SHARES) 7.4% 29.2% 8.0% 13.4% 13.4% 15.6% 11.5%
TRBCX (T. ROWE PRICE BLUE CHIP GROWTH FUND INC. T. ROWE PRICE BLUE CHIP GROWTH FUND INC.) 14.0% 47.6% 5.7% 12.7% 14.2% 16.6% 11.1%
VFINX (VANGUARD 500 INDEX FUND INVESTOR SHARES) 9.5% 29.1% 10.0% 14.3% 12.8% 15.0% 9.9%
VIVAX (VANGUARD VALUE INDEX FUND INVESTOR SHARES) 8.1% 18.6% 9.0% 10.7% 10.2% 13.2% 8.7%
VIGRX (VANGUARD GROWTH INDEX FUND INVESTOR SHARES) 10.4% 40.1% 9.3% 17.1% 15.0% 16.6% 11.1%

The above funds are mostly well-known for many retirement plans (401(k)) investors. Capital Group’s Growth Fund of America has the biggest asset under management, followed by a long-time favorite Dodge & Cox stock fund. We then see a bunch of Fidelity growth funds and Vanguard funds.

Using a combination of rolling returns of various periods and the smoothness of these rolling returns, we can rank them as follows: 

  1. FDGRX (FIDELITY GROWTH COMPANY FUND FIDELITY GROWTH COMPANY FUND)
  2. VPMCX (VANGUARD PRIMECAP FUND INVESTOR SHARES)
  3. FCNTX (Fidelity Contrafund)
  4. AGTHX (GROWTH FUND OF AMERICA CLASS A)
  5. DODGE & COX STOCK FUND)
  6. TRBCX (T. ROWE PRICE BLUE CHIP GROWTH FUND INC. )
  7. VIGRX (VANGUARD GROWTH INDEX FUND INVESTOR SHARES)
  8. VFINX (VANGUARD 500 INDEX FUND INVESTOR SHARES)
  9. VIVAX (VANGUARD VALUE INDEX FUND INVESTOR SHARES)

It’s interesting to see that Vanguard Primecap, an actively managed fund, ranks higher than its famous stock index funds. 

Notice that VIVAX (Vanguard Index) is not one of the biggest stock funds. We add it to the above comparison table so that it can be compared with TRBCX, the only value fund in the above list. All other funds are essentially classified as growth funds by Morningstar. Note that even VFINX (Vanguard S&P 500 index fund) is now classified as a large growth fund, even though before it was in the ‘Large blend’ category. 

It’s telling that most of these biggest funds are growth funds as we can see that in general, growth funds have outperformed value funds by some big margins in recent years. However, if we look more closely using rolling returns between VIVAX and VFINX, we can see: 

VIVAX has underperformed since 2017 for its rolling 15-year returns. However, VFINX had some big low 15-year period returns from 2014 to 2017. This is mostly due to the two bear markets (2000 and 2008). As VFINX has done a lot better since 2019, it’s ranked higher than VIVAX.  Due to space limitations, we encourage interested readers to look at more rolling return charts such as 2, 5, and 10 years in this detailed comparison link. 

In general, it’s not surprising to see the above list as large growth stocks have done so much better since 2009 that many investors have been attracted to these funds. 

Biggest international stock funds

Among the biggest size stock funds, only two international funds in the following table appear in the top 10 stock funds among all 401(k) plans: 

Top two biggest international stock funds in 401(k) plans: 
Ticker/Portfolio Name YTD
Return**		 1Yr AR 3Yr AR 5Yr AR 10Yr AR 15Yr AR 20Yr AR
AEPGX (EUROPACIFIC GROWTH FUND CLASS A) 7.1% 13.4% -1.5% 6.0% 5.2% 8.3% 6.7%
VGTSX (VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND INVESTOR SHARES) 4.0% 12.5% 1.0% 5.5% 4.3% 7.6% 5.5%

It’s also not surprising to see that Capital Group’s Europacific Growth Fund, an extremely popular fund in many 401(k) and other retirement plans, has done much better than the Vanguard index fund. The following shows the rolling 15-year return charts

To summarize, in general, retirement plan investors flock to high-performance well-known funds, especially when these funds have consistently outperformed for more than a decade. 

The best biggest bond funds in retirement 401(k) plans

Moving on to the biggest fixed-income bond funds in retirement plans, we have the following:

Biggest bond funds in 401(k) plans
Ticker/Portfolio Name YTD
Return**		 1Yr AR 3Yr AR 5Yr AR 10Yr AR 15Yr AR 20Yr AR
PTTAX (TOTAL RETURN FUND A) -1.0% 0.7% -2.9% 0.3% 1.3% 3.0% 3.4%
VBMFX (VANGUARD TOTAL BOND MARKET INDEX FUND INVESTOR SHARES) -1.9% -0.5% -3.0% 0.1% 1.2% 2.3% 2.8%
DODIX (DODGE & COX INCOME FUND DODGE & COX INCOME FUND) -1.3% 2.3% -1.3% 1.7% 2.5% 4.1% 3.8%
PTRQX (PRUDENTIAL TOTAL RETURN BOND FUND CLASS Q) -1.0% 2.4% -2.2% 0.8% 2.2%    
PONAX (PIMCO INCOME FUND CLASS A) 0.8% 6.6% 1.0% 2.5% 3.8% 7.4%  
WACPX (WESTERN ASSET CORE PLUS BOND FUND CLASS I) -2.8% -0.5% -4.8% -0.5% 1.8% 4.7% 3.7%
FTBFX (FIDELITY TOTAL BOND FUND FIDELITY TOTAL BOND FUND) -1.3% 1.6% -2.0% 1.3% 2.1% 4.5% 4.0%
TLRAX (FEDERATED TOTAL RETURN BOND FUND CLASS A SHARES) -1.7% -1.0% -3.1% 0.5% 1.5% 2.8% 3.0%
ABNDX (BOND FUND OF AMERICA CLASS A) -2.1% -1.4% -3.1% 0.6% 1.5% 3.3% 2.5%
WOBDX (JPMORGAN CORE BOND FUND CLASS I) -1.2% -0.2% -2.4% 0.7% 1.6% 2.8% 3.2%
MWTRX (METROPOLITAN WEST TOTAL RETURN BOND FUND CLASS M) -2.2% -1.2% -3.7% 0.0% 1.2% 3.8% 3.8%

The rankings based on our metrics are: 

1. PONAX (PIMCO INCOME FUND CLASS A)
2. DODIX (DODGE & COX INCOME FUND DODGE & COX INCOME FUND)
3. MWTRX (METROPOLITAN WEST TOTAL RETURN BOND FUND CLASS M)
4. PTTAX (TOTAL RETURN FUND A)
5. FTBFX (FIDELITY TOTAL BOND FUND FIDELITY TOTAL BOND FUND)
6. WOBDX (JPMORGAN CORE BOND FUND CLASS I)
7. WACPX (WESTERN ASSET CORE PLUS BOND FUND CLASS I)
8. VBMFX (VANGUARD TOTAL BOND MARKET INDEX FUND INVESTOR SHARES)
9. TLRAX (FEDERATED TOTAL RETURN BOND FUND CLASS A SHARES)
10. ABNDX (BOND FUND OF AMERICA CLASS A)
11. PTRQX (PRUDENTIAL TOTAL RETURN BOND FUND CLASS Q)

A few observations: 

  • The above list includes a lot of candidate funds used in our Total Return Bond fund portfolios (see Income Investor page) that include PIMCO, Fidelity, Metropolitan etc). 
  • It’s no surprise to see that PIMCO Income ranks the highest (and also the biggest in terms of its asset size): this fund has done so much better than the rest that it can be easily seen to be the best. 
  • However, PIMCO’s total return bond fund PTTAX is still the biggest bond fund among 401(k) plans, even though its performance has declined somewhat. 
  • Similarly, retirement investors in 401(k) plans are attracted to bond index fund Vanguard total bond index fund VBMFX, even though this fund has underperformed a lot of other funds.

Again, we want to emphasize MyPlanIQ’s methodology: we advocate stock index funds but for bond investments, we believe excellent actively managed funds can still be more consistent to outperform. 

We want to point out that the above rankings based on rolling returns and a few other metrics are still a work in progress. We will continue to improve this method in the coming months. 

Market Overview

Labor market data for last month are surprisingly strong: nonfarm payrolls added 303,000, above even the most optimistic estimate (the average estimate was 200,000). The unemployment rate dropped to 3.8%, smaller than the previous 3.9%. We are now seeing a few conflicting signals regarding the economy: as mentioned, both retail sales and industrial production indicators had a year-over-year decline for February (we are still yet to get March data). However, a stronger-than-expected labor market offsets these negatives. 

Even though stocks are near record highs, bonds have had negative year-to-date returns so far. The Vanguard total return bond index fund VBMFX has a -2% year-to-date return. It looks increasingly likely that interest rates might have to stay high for a while, given the strong labor market and uneven inflation figures. 

As always, we claim no crystal ball and we call for staying the course which is guided by the well defined and sound strategic and tactical strategies:

  • For strategic allocation (buy and hold) investors, ignore the current market behavior. Remember, as we have emphasized numerous times when you choose and commit to a strategic portfolio, you essentially know and commit that your investment horizon (or the time you need to utilize this capital) is 20 years, preferably much longer, given the current high valuation. As we pointed out, if your investments are those diversified (index) funds such as an S&P 500 index fund (VFINX, for example), you know your money is in some solid ‘business’ that eventually (20 years later and preferably many more years later) will deliver some reasonable returns. As long as you are comfortable with this thesis, you should sit tight and forget about the current gyration.
  • For tactical investors, again, you have to ignore the current market noise. Furthermore, you should follow your strategy rigorously, especially during this time. Human emotion, both optimistic and pessimistic, and human desire, both greedy and fearful, are your worst enemies. This is true time and time again.

Stock valuation has dropped, and now valuation is becoming less hostile. However, it is still not cheap by historical standards. For the moment, we believe it’s prudent to be extra cautious. However, how serious a correction might be, we have confidence in the US economy in the long term and thus in the stocks in aggregate. We just need to manage through interim losses carefully.

We again would like to emphasize that for any new investor and new money, the best way to step into this kind of market is through dollar cost average (DCA), i.e., invest and/or follow a model portfolio in several phases (such as 2 or 3 months) instead of the whole sum at one shot.

Struggling to Select Investments for Your 401(k), IRA, or Brokerage Accounts?

 

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