When you put money into a 401(k) or an IRA retirement account, it’s not just sitting there collecting dust. That cash gets put to work—usually in a mix of stocks, bonds, or blended funds—and over time, those investments are supposed to generate returns.
The real magic behind a healthy retirement nest egg is compound growth. Think of it this way: the gains you earn one year get added to your original savings, and then those gains start earning their own returns.
Take a $10,000 contribution. If it grows at 7%, it becomes $76,000—without adding another dime. At 10%, that same $10,000 becomes about $175,000 over the same stretch.
The Two Hidden Engines of Retirement Growth
A couple of key things make this work even better. First, a lot of employer plans offer matching contributions. That’s free money from your company on top of what you put in—an instant return before the market even does anything.
According to the Bureau of Labor Statistics, about 56% of private-sector workers who have access to a defined-contribution plan actually got an employer match in 2024. Second, with traditional 401(k)s and IRAs, you’re contributing pre-tax dollars. That lowers your taxable income while you’re working, and it leaves a bigger base to keep compounding over the years.
Time is the one thing you can’t fake. If you start investing at 25 and earn a steady 8% a year, you’ll end up with roughly twice as much as someone who starts at 35—even if you both save the same amount every year. That’s not motivation-speak. That’s just math.
So, Which Funds Actually Performed Best in 2025?
With that background in mind, here are three funds that most retirement savers can actually buy—and they posted some seriously strong numbers in 2025, according to data from Schwab, Zacks, and Yahoo Finance.
Fidelity Select Semiconductors Portfolio (FSELX) – Up 42.90%
FSELX closed out 2025 with a total return of 42.90%, per Schwab’s data as of December 31. Over five years, it’s delivered an annualized return of 30.4%, and over ten years, 30.28% per year. Those numbers put it in the top 1% of U.S. equity funds for just about any time period you look at.
This fund has a very narrow focus: it invests in companies that design, make, or sell semiconductors and related equipment. Its single biggest holding is Nvidia, which made up about 24.8% of the portfolio as of late 2024. That bet paid off big. Nvidia’s AI-related data center revenue exploded between 2023 and 2025, and the stock—along with this fund—shot way past the broader market.
The expense ratio is 0.62%, and it’s actively managed by Adam Benjamin, who’s run it since March 2020. This is not a fund for conservative investors or anyone close to retirement. In down years, the losses can be brutal—it dropped 35.18% in 2022. But if you’re looking for massive upside in the semiconductor space (which is basically the backbone of AI right now), it’s a powerful option.
Fidelity 500 Index Fund (FXAIX) – Up 10.77%
FXAIX returned 10.77% in 2025, according to Zacks. Over the past decade, it’s averaged 15.25% annually, making it one of the most consistent passive funds out there.
This one tracks the S&P 500—the float-adjusted, market-cap-weighted index of 500 large U.S. companies—and it does so for an expense ratio of just 0.015%. That’s among the lowest you’ll find anywhere. No minimum investment, and a turnover rate of only 2% per year, which keeps taxable capital gains distributions to a minimum. That’s a nice perk inside a retirement account.
For anyone who wants long-term exposure to the U.S. economy without paying active management fees or taking on sector concentration risk, FXAIX has been a rock-solid core holding. Historically, it beats about 80% of actively managed large-cap funds over any 15-year period, according to S&P Dow Jones Indices’ SPIVA data.
Fidelity Total Market Index Fund (FSKAX) – Up 10.54%
FSKAX returned 10.54% in 2025, also per Zacks. Since its inception, it’s delivered an annualized return of 14.51%, according to Stock Analysis.
Unlike FXAIX, which holds 500 large-cap stocks, FSKAX holds over 3,800 securities—including mid-caps and small-caps. So you get the entire U.S. stock market in one fund. Morningstar gives it a Gold Medalist rating (their highest), citing its process quality and low cost. Expense ratio: also 0.015%.
One last thing: this article is for informative purposes only, and it should not be considered professional advice. Always consult with your retirement expert or financial advisor before putting your money in one place or another.
