Stars of 401(k) accounts.
Thousands of Americans have 401(k) investment plans. But for Americans who are not financial experts, these plans can be extremely complicated and confusing. Even retirement investors with a general understanding of equity funds, mutual funds, bond funds and investing strategies may not be clear about exactly which stocks they actually own in their 401(k) accounts. All popular 401(k) plans will provide investors with a base of diversified holdings, but that doesn’t mean that retirement accounts don’t have much heavier weightings of certain stocks compared to others. Here are seven of the most important stocks in your retirement account.
Apple (ticker: AAPL)
This is likely the single most important company for your retirement. Apple has the highest weighting (4.1%) of any stock in the Fidelity 500 Index Fund (FXAIX), one of the two most popular 401(k) mutual funds. Apple has the second highest weighting (4.3%) in the other most popular mutual fund, the Vanguard Institutional Index Fund (VINIX). In addition, Apple has a 4.6% weighting in the SPDR S&P 500 ETF Trust (SPY) and a 4.8% weighting in the iShares Core S&P 500 ETF (IVV), the two most popular 401(k) exchange-traded funds.
Microsoft Corp. (MSFT)
A close second behind Apple is cloud software giant Microsoft. Microsoft is the top-weighted stock (4.4%) in the VINIX mutual fund and is a close second in weighting behind Apple in the previous funds, with at least 3.5% weighting. In addition, Microsoft is likely heavily weighted in any funds geared toward technology, growth and even dividends, with its 1.2% yield. For example, Microsoft has a 4.9% weighting in the popular Vanguard Dividend Appreciation ETF (VIG) and a 19.2% weighting in the Technology Select Sector SPDR Fund (XLK).
Alphabet (GOOG, GOOGL)
The Class A (voting rights) and Class C (no voting rights) shares of Google parent company Alphabet have a combined average weighting of about 3% in the big four retirement funds previously mentioned. Alphabet has a major presence in any S&P 500 index funds weighted by market cap. Alphabet shares are also overrepresented in any funds geared toward technology and/or growth. For example, Alphabet has an 8.4% weighting in the popular Invesco QQQ (QQQ) ETF. Younger investors with more aggressive and risk-tolerant 401(k) plans are likely to have an even higher exposure to Alphabet than others.
Amazon has taken over online retail and cloud services and it is also taking over your retirement account. Amazon’s weighting in the four largest mutual funds and ETFs ranges from 2.8% to 3.3%. While Amazon’s $935 billion market cap is well short of the $1.2 trillion-plus market caps of Apple and Microsoft, Amazon’s market cap is up 577% in the past five years compared to 230% and 114% gains for Microsoft and Apple, respectively. Amazon is a core holding in 401(k) growth and tech funds, including a 7.9% weighting in the QQQ fund.
Facebook stock’s weighting in the top 401(k) funds ranges from 1.6% to 1.9%. Despite concerns over privacy, data usage, political neutrality, platform abuse, antitrust behaviors and other issues, Facebook still regularly delivers record earnings and revenue numbers. Facebook has nearly tripled its share price in the past five years and has been a big winner for retirement investors. Facebook’s original platform may have fallen out of favor with younger users, which have now shifted more to its Instagram platform. However, many retirees are now active Facebook users, and their retirement accounts benefit from its success.
Alibaba Group Holding (BABA)
For many Americans, Chinese tech giant Alibaba is likely their single largest foreign stock investment in their 401(k) accounts. Alibaba is the biggest public e-commerce and cloud computing stock in the largest emerging market economy in the world, China. Alibaba is not held in any S&P 500 index funds, but it is a top holding in international and emerging market funds. For example, Alibaba is the top holding (1.4% weighting) in the $19.3 billion Vanguard Total International Stock ETF (VXUS). It’s also the top holding in the $68.8 billion Vanguard FTSE Emerging Markets ETF (VWO) with a 6.2% weighting.
Berkshire Hathaway (BRK/A, BRK/B)
There’s good news for any Americans who want legendary investor Warren Buffett managing their retirement investments. Buffett’s Berkshire Hathaway is one of the most widely held 401(k) stocks, with an average weighting in top retirement funds of around 1.6%. Berkshire also adds to Apple’s weighting in American retirement accounts given Apple is Buffett’s favorite stock at the moment. Berkshire owns about $78 billion in Apple stock. In addition to Apple and other Berkshire stocks, retirement investors also gain exposure to Berkshire’s privately owned companies, such as Geico insurance company and the McLane Company, a supply chain company.
Your 401(k) depends on these stocks:
Apple (AAPL)Microsoft Corp. (MSFT)Alphabet (GOOG, GOOGL) Amazon.com (AMZN)Facebook (FB) Alibaba Group Holding (BABA) Berkshire Hathaway (BRK/A, BRK/B)