Understanding 401(k) Investment Options
Target-date funds, index funds, expense ratios, and how to build the right portfolio
The difference between a 0.03% index fund and a 1.0% actively managed fund can cost over $100,000 across a career. About 85% of actively managed funds underperform their benchmark index over 15-year periods.
Common 401(k) Fund Types
- US Stock Index: S&P 500 or Total Market, 0.01-0.05% fees
- International Stock: Global diversification, 0.05-0.15% fees
- Bond Index: Stability and income, 0.03-0.10% fees
- Target-Date Fund: Auto-adjusting allocation, 0.08-0.75% fees