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Best 401(k) Mutual Funds for 2012

Here are two picks for each of five distinct investment classes

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Best Bond Funds

PIMCO mutual funds 401(k)Winner: PIMCO Total Return

PIMCO and its bond fund manager, Bill Gross, got some bad press this year thanks to a disappointing start to 2011. Gross admitted it was a boneheaded move to dump U.S. Treasuries just before bonds started to rally strongly. But you can forgive Gross based on the market turmoil, government mayhem in Washington — and of course his impeccable long-term track record.

You also can be sure that Gross and the PIMCO Total Return Fund (MUTF:PTTDX) will be back with a vengeance in 2012. The mutual fund maintains its Morningstar five-star rating and has returned more than 6% annually during the past five-year and 10-year periods, even accounting for a mostly flat 2011.

With a modest expense ratio of 0.75% and one of the icons of bond investing at the helm since 1987, PIMCO Total Return is a good fit for almost every portfolio in 2012.

Runner Up: BlackRock High Yield

“Junk bonds” scare many investors these days because of their greater likelihood to default in an already tumultuous economic environment and difficult market for corporate and government debt offerings. However, when done right, you can find enough big winners to offset any losers — and that’s exactly what the BlackRock High Yield Bond Fund (MUTF:BHYSX) has a history of doing. Garnering yields sometimes in the double digits on its bonds, BlackRock has more than doubled its investors’ money in the last decade — versus a measly 10% total gain for the broader stock market. The fund gets Morningstar’s top five-star rating and has a modest 0.75% expense ratio.

Jeff Reeves is the editor of Write him at, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks. Check out’s other looks back at 2011 and ahead to 2012 here.

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