If you’re one of millions of Americans climbing the corporate ladder, the greatest decision you can make is to contribute to your 401k plan. Most major firms offer matching contributions up to a certain level; this is the equivalent of free money and you’d be foolish not to participate. At the same time, choosing the best stocks for your retirement portfolio is a substantial undertaking.
On the other side of the table, it’s a daunting challenge for market analysts as well. Not all 401k stocks are appropriate for every investor, as not every investor has the same risk tolerance. Furthermore, depending on how close someone is to retirement, he or she must modulate his or her portfolio accordingly. Even demographics aren’t always the end-all, be-all, since many American workers failed to plan for their future.
Unlike other stories about deciphering the best stocks for your 401k, I understand the balance between capital returns and stability. Too many times, we see the most boring, staid investments hawked as ideal retirement stocks. While you might not lose with them, you’re likely not going to win adequately.
This is the critical reason why you should invest in your 401k, and do so early. All 401k stocks are subject to market risk. The only controllable element is time. With that precious resource, one can overcome a great deal of unexpected pain and volatility: just look at the recovery from the 2008 lows!
Nevertheless, I know how it is — most of us wish we could save more for our future. To that end, I’ve compiled a list of powerful retirement stocks. A single name won’t do it, but having a diverse basket will see you through the constant ebb-and-flow.
Without further ado, here are the 10 best stocks for your 401k!
Best Stocks for Your 401k: Nvidia Corporation (NVDA)
Right off the bat, I’m going aggressive with my 401k stocks and choose Nvidia Corporation (NASDAQ:NVDA) as my front-runner. That may seem like an overly ambitious call at first. Year-to-date, NVDA shares are up 97%, hardly what most people would consider a discounted opportunity. Yet retirement stocks aren’t about picking tops and bottoms. Instead, the question is, will your investment still be relevant 20 or 30 years down the line?
I can think of only a few retirement stocks that I have absolute confidence will still be as strong (if not stronger) than they are today. Furthermore, Nvidia is a double-whammy. Currently, it runs a robust business selling top-of-the-line GPUs. Whether we’re talking about gaming or the blockchain, demand for high-end GPUs will likely only rise. Nvidia chips also stack up well against competing models from Advanced Micro Devices, Inc. (NASDAQ:AMD).
But as InvestorPlace contributor Chris Lau asserts, Nvidia is more than just a graphics card company. It has made significant investments in artificial intelligence that are implemented in exciting industries such as driverless vehicles. In addition, cloud computing and the data centers that support it are multi-billion-dollar industries. Nvidia, with its high-performance computer solutions, has a big-name clientele, and that list will continue to grow.
Best Stocks for Your 401k: Amazon.com, Inc. (AMZN)
I’m going to maintain my aggressive posture with my second pick among retirement stocks: Amazon.com, Inc. (NASDAQ:AMZN). Again, the criticisms strike a familiar tone. AMZN shares are up 60% YTD, and since the close of Oct. 26, it has gained 22%. On paper, its price-earnings ratio is a seemingly absurd 300-times trailing earnings. Everything about Amazon screams “sell!”
If this story was about picking the best stocks for the next six months, I probably wouldn’t mention AMZN shares. I believe the critics are correct — shares have gone up too high, too fast, and a correction is inevitable. But given a multiple-decade timeframe? I think you’re crazy not to consider putting AMZN among a basket of your top 401k stocks.
As I’ve mentioned in several articles, e-commerce is taking a greater portion of the total retail pie. Currently, the allocation is 9.1%. Decades from now, e-commerce will at least be a quarter of total retail, but the actual figure could be higher. It wouldn’t surprise me if online retail surpassed the traditional brick-and-mortar platform, and that bodes very well for AMZN.
To its credit, Amazon isn’t waiting for the disruption to happen. It made an insanely aggressive move acquiring Whole Foods Market, and that won’t be the last. Eventually, Amazon will get its hands on virtually anything we buy.
Best Stocks for Your 401k: AT&T Inc. (T)
Everyone knows that the best stocks for your 401k won’t always be the sexiest names. While capital growth is certainly important, it’s absolutely critical that you don’t absorb too many body blows. As we’ve seen in prior market cycles, years of hard-earned profits could disappear in a flash. Slow and steady wins marathons, which is why I like AT&T Inc. (NYSE:T).
Granted, this is an awkward time to discuss AT&T as one of your best retirement stocks. T shares are suffering uncharacteristically poor performance, down more than 17% YTD. More ominously, the technical charts have been exceptionally choppy and volatile. Presently, T stock is attempting to claw back the losses it incurred after falling through the $35 support line.
All of these are significant, cautionary points; however, they matter mostly to day traders. For those who have a long-term perspective, they have confidence knowing that recent volatility is the exception, not the norm. Moreover, AT&T has extraordinarily positive fundamentals: its vast telecommunications networks, its advances in 5G wireless technologies and of course, its generous dividend yield.
Although anecdotal, most people would agree that AT&T will eventually get its act back together. Annual market losses are rare for this company, especially double-digit losses. Over a long-term span, T stock at these levels likely represents tremendous value.
Best Stocks for Your 401k: HCP, Inc. (HCP)
Demographic analysts, and seemingly all of society, are focused on the Millennial generation, and for good reason. In 2015, Millennials surpassed Generation-X as the single-largest demographic in the American workforce, according to the Pew Research Center. Not surprisingly, business media outlets frequently ran stories on how best to deal with Millennials on the job.
An even bigger milestone was reached in the following year when Millennials became America’s largest living generation. That only served to ramp-up marketing strategies aimed specifically at getting the young to open up their wallets. But amid this noise, a more powerful opportunity was opening up.
Contrary to what some Millennials might think, old people don’t just drift away into some magical land. Somebody has to take care of them, and an increasing number of families are choosing senior-living facilities. This is where HCP, Inc. (NYSE:HCP) comes into play.
HCP is a self-administered real estate investment trust focusing on the healthcare industry. Within its vast portfolio are assisted-living facilities and other services aimed at the retirement community. While it may seem contradictory for young investors to consider HCP stock, it’s one of the best stocks for your 401k because of one inevitability: barring a tragic event, we all grow old.
That’s not something that Millennials will want to hear, but at least you can profit from it.
Best Stocks for Your 401k: Boeing Co (BA)
While President Trump is hard at work for the rest of the country, he can at least boast in making Boeing Co (NYSE:BA) great again! Soon after winning the election, Trump called for the cancellation of a new Air Force One deal. On social media, the President-elect at the time blasted the soaring costs necessary to replace the current Air Force One.
Naturally, BA shareholders were worried.
However, as we all learned by now, this was yet another example of Trump being Trump. The current administration’s pro-America and pro-business message resonated strongly with Boeing.
On a YTD basis, BA stock is up over 70%, enjoying one of the best years in recent memory. Furthermore, nothing in the technical charts suggest that this rally will end anytime soon.
But the reason why I think BA is one of the best stocks for your 401k is its business diversity. As you know, Boeing has significant exposure to both civilian and military revenue sources. But what I really dig is its innovation towards unmanned aerial vehicles, or UAVs. Boeing developed a number of unmanned assets, such as “Phantom Eye” and the Insitu ScanEagle.
UAVs are the future of warfare, and we’re already seeing this trend’s “fruits.” For a variety of reasons, the U.S. Air Force has a pilot shortage crisis. But part of it has to be demand: as technology improves, fewer reasons to send humans in harm’s way exists.
That might stink for the art of dog-fighting. Nevertheless, profit from this trend by picking up BA stock for the long haul.
Best Stocks for Your 401k: Raytheon Company (RTN)
In keeping with the military theme, a top idea among retirement stocks is Raytheon Company (NYSE:RTN). For any long-haul investment strategy, the defense sector is a no-brainer. We only have two guarantees in life: death and taxes. But as an American, we have a third inevitability. Somewhere, at some point in time, we’re going to blow the smithereens out of some country for … reasons.
But taking such a stark stance would mean companies like Lockheed Martin Corporation (NYSE:LMT) and Northrop Grumman Corporation (NYSE:NOC) would enjoy robust gains. I don’t doubt it for a second. However, I prefer RTN stock over any of these names because the nature of warfare is changing; more to the point, warfare is changing to Raytheon’s benefit.
Currently, military experts are debating whether aircraft carriers are obsolete. A future conflict against a “near-peer” foe would make aircraft carriers woefully vulnerable to precision-guided missile strikes. In other words, modern warfare is economically asymmetric: a million-dollar missile could destroy a billion-dollar asset.
As I previously mentioned, UAVs are the wave of the future. Indeed, warfare is becoming far less personal. When we get into another war, we are almost guaranteed to use our guided missiles first. This macabre certainty means RTN stock is a must-have for your retirement portfolio.
Best Stocks for Your 401k: Barrick Gold Corp (USA) (ABX)
Since the commodities bubble burst in 2011, gold and silver investments have stunk up the markets. Some of the precious metals’ woes have to do with the fact that the feared hyperinflation never came. Complete and utter societal collapse never occurred. Worst of all, I have to find a place to store all my MREs. And what on earth am I going to do with this generator?
So it’s with some reservation that I suggest Barrick Gold Corp (USA) (NYSE:ABX) as one of the best 401k stocks. I believe in gold bullion’s long-term use as a store of value and as a safe-haven asset. However, for the past few years, precious metals have done little besides the occasional head-fake.
Still, aside from the doom-and-gloom fear-mongering, gold and other rare metals have tremendous utility. Many of the technologies that we enjoy every day would not work without precious metals. While analysts often love to bash gold and gold miners like ABX, rare commodities are always important.
Moreover, the metals complex has been undervalued for several years now. Based on historical trends, we are right to expect another rally. Fortunately, when it comes to 401k stocks, time is our friend. Seeing as how the worst of the commodities markets is likely behind us, gold could glitter once again.
Best Stocks for Your 401k: Microsoft Corporation (MSFT)
I was really torn on my decision to pick Microsoft Corporation (NASDAQ:MSFT) as a retirement idea. Among 401k stocks, the safer bet, in my opinion, is International Business Machines Corp. (NYSE:IBM).
Neither Microsoft nor IBM is sexy. However, IBM is so unsexy that it takes away the appeal from surrounding investments. And this kind of “ugly duckling” is exactly what you want for your retirement portfolio.
Nothing in life is guaranteed; nevertheless, I’m pretty sure that IBM will be around in the next 30 or 40 years. But the reason I picked MSFT stock is that Microsoft’s superb management team demonstrates a willingness to stir things up. No, rocking the boat isn’t what you typically want to do for your retirement. Yet if you want to make solid gains, you have to take solid risks.
One of IBM’s current claims to fame is its forays into the blockchain and cloud computing. Microsoft, however, can say the same thing. Both actually have similar attributes. The difference is the willingness to take smart, calculated risks. When MSFT bought out LinkedIn, it seemed like a crazy-pricey deal. But such a move aligns perfectly with their cloud-integration strategy.
I love Microsoft’s agility and its moxy to pull the trigger on deals outside its comfort zone. This is the mentality that you need for 21st century business, and MSFT has it in spades.
Best Stocks for Your 401k: General Motors Company (GM)
My heart says Nissan Motor Co Ltd (ADR) (OTCMKTS:NSANY), largely because I drive one. However, the speculative part of my brain says go with General Motors Company (NYSE:GM). Picking an automobile company is an awkward deal at this juncture. I recently discussed the potential risks of peak automobile sales to dissuade against GM stock, no less!
However, I wrote that piece in the context of year-to-year opportunity costs. Put another way, I think better choices exist that can move your money now. But when you’re talking about decades, not years, the entire framework changes.
Plenty of stuff can happen over the next 20 to 30 years. Immediately following World War II, American cars were the gold standard. But as events like the Vietnam War skyrocketed gas prices, Japanese cars, which featured smaller chassis and more fuel-efficient engines, forged their way into the American consciousness.
Today, the Japanese advantage is far less pronounced. Domestic auto manufacturing finally caught on to macro trends, and they have achieved substantive successes. More importantly, the automotive sector is rapidly shifting towards electric vehicles and driverless technologies. In this case, GM has a significant advantage as arguably the best semiconductor firms are located right here.
It’s a bit of a long shot, but I’m willing to bet that the automotive picture will look considerably different in the year 2047.
Best Stocks for Your 401k: Electronic Arts Inc. (EA)
Consumer electronics trends are difficult to predict. When I was younger, I always assumed that the 3.5-inch floppy disk would be a computing mainstay. Then, at some point, the floppy-disk slots disappeared. Today, even the CD/DVD drive is falling out of favor as more people rely on streaming services and flash-memory devices.
Still, one consumer trend that I’m confident will be around decades from now is video and computer games. Gaming used to be the exclusive abode for tech geeks and nerds. That is no longer the case. The entire sector has so rapidly altered the paradigm that video gaming could one day become an Olympic sport.
Hence, I think Electronic Arts Inc. (NASDAQ:EA) has extraordinary long-term potential, irrespective of its already massive achievements and accolades. EA is one of the few companies that carefully analyzes its market and responds accordingly. From humble beginnings, the gaming firm established lucrative professional sports deals. Now, all they have to do is to improve upon prior platforms to rake-in serious revenues.
Indeed, the sports endorsements are huge for EA. Aside from the “Madden” NFL series, some of their other sporting titles aren’t great, perhaps even mediocre. None of it matters. EA owns the rights, so it gets to make the rules.
It’s a vicious business strategy, but as a retirement stock, you should have it no other way!
Josh Enomoto owns gold.