Image: 401k © Tom Grill, Corbis

Related topics: value stocks, ETF, mutual funds, Vanguard, growth stocks

When it comes to investing for retirement through 401k's, investors have a lot of options.

Investment management company Vanguard continues to use its heft and low costs to pick off competitors. It has been winning investors with new funds (up to 20 in 2010), free trading in Vanguard's exchange-traded funds, lower minimums for its low-cost Admiral shares and other consumer-friendly features.

Yet, while all this will help Vanguard gather assets and reduce costs for you and me, the longer the fund list grows, the more confusing it can be to separate the winners from the losers.

To make matters worse, the major drawback to investing in a 401k is that your options are limited to the funds made available by your plan's administrators. Typically, they choose middle-of-the-road funds deemed safe enough to keep employees from losing their shirts, and the administrators from losing their jobs.

So unless you use your 401k plan's brokerage option, you aren't likely to be able to invest in any Vanguard fund you like (and even the brokerage service may not have access to all Vanguard funds). In the case of Vanguard Precious Metals and Mining (VGPMX), that's a good thing. The fund is incredibly volatile, with a maximum cumulative loss of 69.8% in the most recent bear market versus 50.9% for Vanguard Total Stock Market Index (VTSMX) and 51.0% for Vanguard 500 Index Investor (VFINX). So much for gold funds being a safe haven.

On the other hand, you also aren't likely to have access to some funds that you probably should have in your portfolio, such as the Vanguard Emerging Markets Index Fund (VEIEX), which I highly recommend for 401k investors (not for all of your money, of course, just a 5% portion).

In fact, I believe that as the global economy continues healing, having an allocation to emerging markets will become a virtual requirement for investors with long-range objectives, including retirement. That's why I'd suggest you ask your plan administrator to add this fund to the mix of choices your company includes in its 401k plan. (I'm also doubtful your 401k gives you access to the terrific Vanguard Health Care (VGHCX) fund, which offers investors exposure to the growing demand for medical products and services in emerging economies.)

Below are several additional Vanguard funds I'd like to see in your 401k portfolio. Use them if they're available to you. If they're not, request them. You might need to enlist your colleagues to persuade your benefits department to add them, but remember that what's at stake is your retirement. Your 401k plan should be serving you.

As a retirement savings vehicle, a 401k is inherently geared toward the long term. You don't want to just save your money, you also want to see it grow. Consider that even at a retirement age of 60 to 65, you could live at least an additional 30 years. Invest too conservatively and you could outlive your money.

To prevent this, my first recommendation is a trio of Vanguard funds run by the redoubtable team at Primecap Management: Vanguard Primecap (VPMCX), Vanguard Primecap Core (VPCCX) and Vanguard Capital Opportunity (VHCOX).

All three funds are closed to new investors outside of established 401k plans, but they may be available to you. If so, consider yourself lucky and place some of your money with this group of managers who take a value-oriented approach to growth stocks. Their funds are the largest single component of my retirement and nonretirement accounts, as well as those of my wife and kids.

If the Primecap funds are closed to you, Vanguard Wellington (VWELX) is an excellent choice as the core fund for your 401k. Since its inception in July 1929, it has aimed for strong relative returns in good and bad markets by focusing on one very important investment discipline: diversification.

It's a balanced fund, so approximately 60% to 70% of Wellington's assets is in high-quality blue-chip stocks and the remainder in top-notch investment-grade government and corporate bonds. You can easily get the entire bond exposure you need in your 401k portfolio from this fund. Vanguard Wellington has the flexibility to invest as much as 20% of its equity assets in foreign securities, an important part of a diversified portfolio.

What I like most about Wellington is its management team. Lead manager Ed Bousa took the position in 2003 with nary a change in the fund's strong and consistent gait, and with very minor changes in the portfolio, which is precisely what I had expected, given his long association with former manager Ernst von Metzsch.

Bonus: By investing through your 401k, you can avoid the hefty $10,000 minimum initial investment required to get into Wellington on your own. If you decide to follow this strategy, I'd suggest putting about 40% of your money in Wellington.