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Four Great Funds for 401(k)s and IRAs Only

Put them in a tax-sheltered account but keep these out of taxable accounts.

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It's been over a year since I wrote about good funds for IRAs, so I thought I'd revisit the subject from a different angle. The basic idea of choosing a fund for a tax-deferred account is to find a great long-term investment. Whether it's tax efficient or not doesn't matter; just find a good one you can hold on to. Last year, I picked a few IRA funds that met that criteria but I didn't go out of the way to pick funds that were not efficient from a tax standpoint.

This time I'll turn around and pick a few outstanding funds that are for tax-sheltered accounts only. This will give you ideas for tax-sheltered accounts, including IRAs, 401(k)s, and 403(b)s, and it will provide an idea of what not to put in a taxable account.

 Artisan International (ARTIX)
This fund won't always be a poor choice for a taxable account, but right now it's sitting on potential capital gains of 35% of assets. Like many good foreign funds, this one has enjoyed stellar returns over the past several years and that means big gains have built up. The fund has returned an annualized 22% over the past three years. With a turnover rate of just more than 50%, it's fair to assume this fund has some taxable capital gains distributions coming up. This applies to a lot of foreign funds, so tread carefully when investing for a taxable account.

Russel Kinnel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.