When it comes to saving for retirement, sometimes it’s good to be boring.
With growth funds dragged down by tech stock declines, their more buttoned-down cousins — funds that take a more value-oriented or balanced approach to investing — have supplanted them as leaders among the most popular 401(k) funds in retirement savings plans.
Actively managed 401(k) funds are outperforming those that track an index in another sign slumping markets have turned traditional investing maxims on their head. Over the past 10 years, only 17% of actively managed funds have outperformed the S&P 500 Index, according to data from S&P Dow Jones Indices. This year, eight of the 10 leaders among the most popular retirement funds, as measured by BrightScope, are actively managed.
The leading funds now are helmed by stock- and bond-pickers that use either a balanced approach that mixes stocks and bonds, focuses on income, or sets out to find reasonably priced or temporarily underpriced stocks with good long-term growth potential.
Value exchange-traded funds are also getting more attention amid the recent market turbulence. They’ve taken in $55 billion so this year, and $91 billion over the past 12 months, according to Eric Balchunas, senior ETF analyst at Bloomberg Intelligence.
“This is a legitimate rotation [from growth], much different from the head fakes and false starts we’ve seen in the past,” he said. “Now that the Fed and its sugar is gone, the market is valuing value much more.”
It’s worth noting that even the best value-oriented fund performers among the largest 100 401(k) funds have anemic returns for the year, however, with the biggest gain a mere 0.5%, and the others with single-digit drops. The S&P 500, meanwhile, had dropped 12% through Thursday’s close.
This article was provided by Bloomberg News.