When the novel coronavirus pandemic caused everyone to shelter in place, millions had the same bright idea: use the downtime to invest in stocks. I don’t mean that in a snarky way. As you know, Wall Street has a specific time that it’s open to retail investors. Now, many more people can participate, leading to an uptick in flavors of the week. However, now is also a great time to think about the best 401k investments.
Sure, I get it: you’d rather spend your time channeling your inner Gordon Gekko. Moreover, you may have heard of brilliant success stories from newbie traders striking it rich. But it’s also fair to point out that the markets can be a cruel beast for those who are unprepared. Just because you look like a genius today doesn’t mean the same perspective will apply tomorrow.
Further, when you consider companies that belong on any list of best 401k investments, you’re mostly dealing with reliable blue chips that have stood the test of time. What makes this category of publicly traded assets appropriate for retirement funds is that they mitigate downside during bear markets while more than making up for the losses in bull markets.
And that’s a concept to keep in mind ahead of an uncertain road. As you know, the politics in this country have reached a boiling point. Additionally, the so-called economic recovery from the worst of the pandemic is fractured, with certain communities disproportionately impacted. Therefore, it’s at least within the realm of possibility that stocks could tumble.
However, that also means relevant names will be on discount. And when you’re advantaging suddenly low prices, it’s far better to gamble on high-quality companies. With that in mind, here are seven best 401k investments to consider:
- Amazon (NASDAQ:AMZN)
- Microsoft (NASDAQ:MSFT)
- Costco (NASDAQ:COST)
- Cisco (NASDAQ:CSCO)
- Intuit (NASDAQ:INTU)
- Johnson & Johnson (NYSE:JNJ)
- NextEra Energy (NYSE:NEE)
Before we get into it, you’ll want to monitor social developments that could impact business and society years down the line. For that reason, I’ve kept my ideas diverse, covering several major industries. Without further ado, here is my list for best 401k investments.
Amazon is no stranger to generating headlines. Recently, though, some perplexing news stories raised eyebrows regarding AMZN stock. As you know, Peloton (NASDAQ:PTON) went from a widely mocked exercise equipment manufacturer to one of the most relevant companies thanks to the shutdowns associated with the novel coronavirus pandemic.
Then, what appeared to be Amazon’s Peloton clone, colloquially dubbed the “Amazon bike,” made the rounds on the e-commerce platform’s website. Sold by a company called Echelon, it caused PTON shares to collapse. But it turns out that this was a giant misunderstanding. Amazon is not collaborating on an exercise bike and PTON resumed its upward trend.
But that just goes to show you how dominant AMZN stock is. Even false rumors are enough to send shivers to competitors, simply because such rumors carry weight. And this is exactly why you need to consider Amazon as one of your best 401k investments. There’s no stopping this beast.
By now, you’re all familiar with how the company’s CEO Jeff Bezos has gotten filthy rich during the pandemic. Well, he’s probably going to get richer. With e-commerce representing a whopping 16.1% of total retail sales in the second quarter of this year, consumers have gotten a taste of online shopping and they love it.
Like Amazon above, Microsoft is an obvious idea for a long-term strategy. However, that’s exactly the kind of companies to consider for inclusion into your list of best 401k investments. This is your retirement fund that we’re talking about, so you don’t want to go overboard with too many speculative bets.
That said, you may be surprised at how resilient MSFT stock is. Sure, Apple (NASDAQ:AAPL) took a big bite out of Microsoft during the 2000s decade. However, the company kept fighting and when current CEO Satya Nadella took over, it has crafted several relevant services and products. Better yet, looking well into the future, MSFT is likely unassailable. I say that because the business world runs on Microsoft.
Of course, that was true well before the pandemic. But during this new normal, the case for MSFT stock has improved significantly. With millions of people working from home, it has never been more important to share the same work platform. Clearly, this benefits the company’s Software as a Service applications.
Additionally, the lockdowns have helped organically market other products, such as the collaborative platform Microsoft Teams, facilitating easy remote working.
Back when rumors started circulating that the novel coronavirus had already arrived at our doorstep, people panicked. Personally, I noticed it first at my local grocery store when, in just a matter of days, the entire toilet paper aisle was cleaned out. But at Costco, it was a madhouse. At one point, it was like Black Friday every day for the warehouse retailer.
Historically, such crises only come around once every blue moon. Therefore, I’m not recommending anyone buy COST stock exclusively on the coronavirus narrative. That would be silly. However, there’s a reason why this company is featured as one of the best 401k investments.
Primarily, it’s the affluent user base. Multiple reports indicate that Costco consumers make on average six figures, which makes sense. But what doesn’t get talked about as much is how much Costco employees make. According to Payscale.com, the retailer offers competitive salaries that apparently keep workers happy relative to other food-selling entities.
From a corporate governance perspective, that’s a positive for COST stock and could indicate longer-term sustainability. Further, because of the underlying company’s affluent customers, it doesn’t matter what kind of economic recovery we have. Whether K-shaped, L-shaped, V-shaped or pick a letter from the alphabet, Costco members will keep on coming.
When the pandemic first hit us, many companies reacted by sending their employees to work from home. While remote work technology has been around for a long time, never has the U.S. (or the world for that matter) implemented it at full speed on short order. Although most worker bees were quite happy I’m sure, it presented problems for corporations.
Particularly, what kept managers and executives awake at night was the risk of cybersecurity. And this is why Cisco should be on your short list of best 401k investments. Yes, the company is a stable (read boring) firm that churns out a nice dividend yield. But thanks to the pandemic, CSCO stock has taken on greater urgency.
For one thing, cybercrime never sleeps. In fact, nefarious actors are always seeking to defeat the best network defenses. Plus, it’s a worldwide problem. According to European internet research firm AksjeBloggen, the healthcare industry suffered an average data breach cost of $7.13 million, 84% higher than the global average.
Second, remote work could be with us on a semi-permanent basis. For instance, we could see three- or four-day workweeks, with the remaining days’ duties completed from home. Whatever the case, any remote work extends the vulnerability of an organization’s priority information. Therefore, the case for CSCO stock is only going to get stronger, making Cisco one of the best 401k investments flying under the radar.
Some of my InvestorPlace readers may know that I’ve written about the contrarian case for H&R Block (NYSE:HRB). Admittedly, shares have underperformed, currently trending in a sideways consolidation pattern. However, I believe that over the next few years, its luck could change. With the gig economy becoming far more relevant than before — and it was very relevant pre-pandemic — it seems accounting will be great again.
But this might be a case where the industry is compelling but not necessarily the company. So, if you’re looking exclusively at best 401k investments, you may want to check out Intuit. Best known for its QuickBooks and TurboTax software, Intuit isn’t exactly going to get your blood flowing. But as an asset within a retirement portfolio, you’re in good hands with INTU stock.
Further, the fundamental changes to our work environment will likely inspire many to become independent contractors. Thus, you will likely see organizations like Fiverr (NYSE:FVRR), which connects freelance workers with clients needing specific expertise, rise. And that bodes well for INTU stock as independent contractors have far more complicated taxes than employees.
Johnson & Johnson (JNJ)
As you know, biotechnology and pharmaceutical firms have been dominating the front page due to their “two-fer” potential. First and foremost, a novel coronavirus vaccine would go a long way in helping to contain this crisis. After all, it doesn’t seem like requests for nationwide cooperation is working.
Second, by developing and distributing a successful vaccine, the biotech/pharmaceutical industry could help kickstart the economy. While cynical, this is the reason why President Trump is pushing for a vaccine before the election. He knows that an economic rebound or a credible narrative for one will undo many shortcomings.
And now, Johnson & Johnson is making great progress with its viral-vector vaccine candidate, which has entered Phase 3 trials. Unlike so many other vaccine candidates, this is proposed to be a one-shot-and-done vaccine. Other candidates, such as the one from Moderna (NASDAQ:MRNA), will likely require two doses, presenting logistical challenges. Suddenly, JNJ stock looks very interesting from an epidemiological perspective.
Just as importantly, this is a great PR opportunity for Johnson & Johnson. As you know, the healthcare giant has courted multiple controversies in recent years. Needless to say, it cast an ugly light on what was a trusted family brand. By contributing to the Covid-19 battle, the company can slowly but surely gain that trust back, benefitting JNJ stock.
Finally, the manner in which it was able to pivot and make up for lost ground is impressive. Thus, JNJ is a worthy candidate for best 401k investments to consider.
NextEra Energy (NEE)
This is a topic that rankles many conservatives. However, the many disasters that we’ve suffered in 2020 — the pandemic, hurricanes, blackout-inducing hot weather and wildfires — have brought climate change back to the forefront. Of course, prior discussions about the environment has helped the case for green energy solutions like NextEra Energy. But this year is different.
As California Governor Gavin Newsom toured the devastated regions of his state, he stated that the debate about climate change is over. It signaled that he was about to push for legislative change, using his office’s power if need be. And recently, he made good on his intentions, issuing “a sweeping executive order that will effectively ban the sale of new gasoline and diesel-driven vehicles by the year 2035 by requiring that any car you drive off the dealer’s lot be zero emission.”
While this doesn’t directly support NEE stock, the order signals that many public officials are not messing around. Like it or not, these folks have significant political support, which is a useful barometer for the social viability of green energy technologies.
Now, please don’t send me a bunch of hate mail suggesting that I support Governor Newsom. I absolutely do not. Personally, I think it’s ridiculous to impose economy-killing executive orders, especially at a time like this. However, clean energy sentiment is the real deal. And that means you need to consider NEE stock in your list of best 401k investments.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.