One of the most important retirement strategies is selecting the right asset allocation for your 401(k). Here are a few of the top-performing 401(k) funds in 2022.

Choosing a 401(k) fund

Experts say, for the majority of investors, there are only two factors to consider when choosing which fund is right for you: Your risk tolerance and time horizon (fees and diversification).

However, if you’re looking to keep your funds secure, then risk-free treasury bills make the most sense. In truth, most actively managed funds failed to outperform an index over the long term, according to the money experts at US News.

Overall, to maximize performance, make consistent contributions and stay the course. This can be made easier with broadly diversified, low-cost holdings.

The top 5 401(k) funds

1. Vanguard Wellington Fund Investor Shares (VWELX)

This is Vanguard’s oldest mutual fund, popular with investors seeking a balance, as it offers a slightly more aggressive 67/33 stock/bond allocation than a traditional 60/40. VWELX charges an expense ratio of 0.24%, or $24 for every $10,000 invested, and requires a minimum investment of $3,000.

2. Fidelity 500 Index Fund (FXAIX)

FXAIX is a lower-cost alternative to VINIX, offering an expense ratio of just 0.015%. For a $10,000 investment, the cost is only $1.50 in annual fees, and for a one-million-dollar portfolio, annual fees would be $150. Since 1988, FXAIX has returned an annualized 10.3%.

2. Vanguard Institutional Index (VINIX)

Considered a good choice for younger investors with both a high risk tolerance and a long time horizon, this S&P 500 index fund is excellent for letting it ride for 30+ years. Since 1957, the S&P 500 has returned an annualized 10% with dividends reinvested, despite numerous crashes. The fund charges an expense ratio of 0.035%.

4. T. Rowe Price Retirement 2030 (TRRCX)

A good choice for those who may retire in the next 6-8 years, this fund offers a more conservative asset allocation. The fund has 67% invested in U.S. and international equities, with 16% in investment-grade bonds, 10% in international and high-yield bonds, and 6% in cash. TRRCX charges an expense ratio of 0.58%.

5. PIMCO StocksPLUS Long Duration Fund (PSLDX)

Since its inception, PSLDX is one of the rare funds to consistently outperform the market, beating the S&P 500 with a 13% annualized return. It is a 100/100 stock/bond split, essentially a 50/50 stock/bond fund on two times leverage. The fund charges a 0.59% expense ratio. The fund is intended for institutional investors and is not available in every 401(k) plan.