5 battle-tested funds for 401k's

Related topics: 401k, investments, savings, retirement, mutual funds

Oil prices have spiked, as have prices of many other commodities. There's been a major earthquake and a resulting nuclear crisis in Japan. Yet the Dow Jones Industrial Average ($INDU)is near its 2-year high.

That's good news for 401k statements, but it's a very difficult environment for investors. After all, 401k investors have long-term savings goals. They want to know which funds can help them navigate the volatility and produce solid long-term returns amid such upheaval.

With the help of BrightScope, an independent provider of 401k plan ratings, we've put together a list of top funds for various asset classes, including bonds, large-cap stocks, small caps and international investments.

Vanguard Total Bond Market Index

Since the early 1980s, the bond market has had a tremendous bull run. So it may not be a good bet that bonds will continue to generate large returns for 401k plans.

Then again, it can be advantageous to have bond exposure, which can help investors cope with the volatility.

The Vanguard Total Bond Market Index (VBTIX)fund has provided an average annual return of 5.4% over the past decade. During the financial crisis of 2008, the return was also 5.4%.

The fund is based on the widely followed Barclays Capital U.S. Aggregate Bond Index, and a majority of the portfolio is in government issues.

Dodge & Cox International Stock

International funds have been a good way to get extra returns for a 401k, and this should be the case for years to come.

One way to play this trend is the Dodge & Cox International Stock (DODFX)fund. All in all, the strategy is to focus on undervalued issues. This means, though, that it can take some time to see results. (Keep in mind that the turnover is only 15%.)

The Dodge & Cox fund also has a bent for larger companies. The top holdings include South African media company Naspers (NPSNY, news), British wireless carrier Vodafone Group (VOD, news), German drug maker Bayer (BAYRY, news)and Swiss drug makers Novartis (NVS, news)and Roche (RHHBY, news).

Neuberger Berman Genesis

While small-cap funds are volatile, the swings should be dampened for those investors who look to the long haul. It also helps if the fund focuses on high-quality companies that have strong competitive advantages.

To this end, the Neuberger Berman Genesis (NBGIX)fund is a good choice. The main portfolio managers have been at the fund since the mid-1990s, so they certainly know how to manage various market cycles, which is critical for small-cap fund managers.

This fund's 10-year annualized performance is a sizzling 11.49%. The fund was able to post a decent performance during the financial crisis, beating the market by more than 4% in 2008.

Growth Fund of America

American Funds Growth Fund of America (AGTHX)is a mega-equity fund. Because of its girth, the focus is on larger companies. However, there is a bent toward those with growth potential.

Among the fund's top holdings are Oracle (ORCL, news), Google (GOOG, news), Microsoft (MSFT, news)and Apple (AAPL, news). (Microsoft is the publisher of MSN Money.)

Interestingly, the fund recently expanded its mandate to allow 25% of its portfolio to be invested in foreign securities. This should be a big help in finding additional growth opportunities.

Vanguard Institutional Index

The Standard & Poor's 500 Index ($INX)is the gold standard for tracking the U.S. stock market. So why not buy a fund that essentially tracks this index? Over the long run, it should be a winning strategy.

One of the top funds in this space is Vanguard Institutional Index Instl (VINIX), which benefits investors with its rock-bottom fees. Consider that the expense ratio is only 0.05%. And the turnover ratio is a mere 4%.

This article was reported by Tom Taulli for InvestorPlace.