By Dan Wiener of InvestorPlace

NEW YORK (

TheStreet

) --

Vanguard

is in the business to win, what with 20 new funds on the table in 2010 (most have already launched, but a few have been temporarily delayed), free trading in its ETFs, and drastically reduced minimums for its lower-cost Admiral shares. And it's going to keep picking off the competition using its heft and low costs.

Yet, while all of this will help Vanguard gather assets and reduce costs for you and me, the longer the list of funds gets, the more confusing it can be to pick the winners from the losers.

To make matters worse, the major drawback of investing for retirement in a 401(k) is that your options are limited to the funds your plan administrators make available. Typically, they choose middle-of-the-road funds deemed safe enough to keep employees from losing their shirts -- and the administrators from losing their jobs.

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So unless you use your 401(k) plan's brokerage option, you aren't likely to be able to invest in any Vanguard fund you like (and even the brokerage service may not have access to all Vanguard funds).

In the case of

Vanguard Precious Metals & Mining Fund

(VGPMX) - Get Report

, that's a good thing. The fund is incredibly volatile, with a maximum cumulative loss of 69.8% in the most recent bear market vs. 50.9% for

Vanguard Total Stock Market

(VTSMX) - Get Report

and 51.0% for

Vanguard 500 Index

(VFINX) - Get Report

. So much for gold funds being a safe haven.

On the other hand, you also aren't likely to have access to some funds in which you probably should have an allocation, such as the

Vanguard Emerging Markets Index Fund

(VEIEX) - Get Report

, which I highly recommend for 401(k) investors (not for all of your money, of course, but for a 5% portion).

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In fact, I believe that as the global economy continues to heal, having an allocation to emerging markets will become a virtual requirement for investors with long-range objectives, like retirement. That's why I'd suggest you ask your plan administrator to add this fund to the mix of choices your company includes in its 401(k) plan. (I'm also doubtful your 401(k) gives you access to Vanguard's terrific Health Care fund, which in itself offers access to the growing demand for medical products and services in the emerging world.)

Here are several other Vanguard funds I'd like to see in your 401(k) portfolio. Use them if they're available to you. But if they're not, try requesting them. You might need to enlist your colleagues to convince your benefits department to add them. But remember, it's your retirement that's at stake. Your 401(k) plan should be serving you, not covering the administrator.

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PRIMECAP Is No. 1

As a retirement savings vehicle, a 401(k) is inherently geared toward the long term. But when planning for retirement, you don't just want to save your money, you want it to grow.

Consider that even at a retirement age of 60 to 65, you could live another 30 years or more. Invest too conservatively, and you could outlive your money. To prevent this, my first choice for your 401(k) is a trio of Vanguard funds run by the redoubtable team at

PRIMECAP Management

:

PRIMECAP

(VPMCX) - Get Report

,

PRIMECAP Core

(VPCCX) - Get Report

and

Capital Opportunity

(VHCOX) - Get Report

.

Unfortunately, there's a hitch: All three funds are now closed to new investors outside of established 401(k) plans. However, they may be available to you. If so, consider yourself lucky, and don't hesitate to give a big slug of money to this group of managers who take a value-oriented eye to buying growth stocks. Their funds are the largest single component of my retirement and nonretirement accounts, as well as those of my wife and kids.

Balancing Risk and Return Since 1929

If the PRIMECAP funds are closed to you,

Vanguard Wellington

(VWELX) - Get Report

is an excellent choice for the core around which you build the rest of your 401(k) portfolio. Since its inception in July 1929, it has held out the promise of strong relative returns in good and bad markets by focusing on one very important investment discipline: diversification.

As a balanced fund, approximately 60% to 70% of Wellington's assets are in high-quality blue-chip stocks, and 30% to 40% are in top-notch investment-grade government and corporate bonds. You can easily get the entire bond exposure you need in your 401(k) portfolio from this fund. The fund also has the flexibility to invest as much as 20% of its equity assets in foreign securities, an important part of a diversified portfolio.

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What I like most about Wellington is its excellent management team. Wellington manager Ed Bousa took the lead management position at Wellington in 2003 with nary a change in the fund's strong and consistent gait, and very minor changes in the portfolio, which is precisely what I had expected, as he had worked with former manager Ernst Von Metzsch for so long.

Bonus: By investing through your 401(k), you can avoid the hefty $10,000 minimum initial investment required to get into Wellington on your own. If you decide to follow this strategy, I'd suggest putting about 40% of your money in Wellington.

Mid-Caps Are the Sweet Spot

Once you've established the core of your portfolio with the PRIMECAP funds or Vanguard Wellington, you'll want to put about 40% of your 401(k) money into mid-cap funds. After Vanguard Capital Opportunity, my favorite at Vanguard is

Vanguard Selected Value

(VASVX) - Get Report

fund, though I don't think many 401(k) plans hold it.

If your plan doesn't hold either of these funds, you could ask for them, or simply go with an index duo:

Vanguard Mid-Cap Growth Index

(VMGIX) - Get Report

and

Vanguard Mid-Cap Value Index

(VMVIX) - Get Report

.

Of course, holding an equal weighting in these two index funds would be pretty much equivalent to holding

Vanguard Mid-Cap Index

(VIMSX) - Get Report

, but splitting your money between the two funds gives you the flexibility to shift your weighting toward the growth or value side, depending on what's happening in the market.

Right now, for example, you'd want to overweight the growth side of the ledger. The financial stocks that are a heavy component in the value index fund have had a healthy run, as have the tech stocks in the growth fund. But there's a better chance that tech stocks will continue to gain momentum in the economic recovery, while the banks are still under a regulatory and monetary cloud.

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Best Vanguard International Funds

For the remainder of your 401(k), you'll want some exposure to international funds (say, 10% to 15%), and Vanguard has some stellar choices.

Vanguard International Growth

(VWIGX) - Get Report

is my favorite, and there's a good chance it's available in your 401(k).

Although it has three managers, International Growth still holds just 180 stocks or so, and close to 17% of its assets are in the top 10 stocks. That's the kind of concentration I like. The managers also aren't afraid to invest in emerging markets, something you don't always find in more-plain-vanilla international funds.

Now, for a bit of extra kick, you can add

Vanguard Emerging Markets Index

(VEIEX) - Get Report

. As I mentioned before, if it's not already available, ask your 401(k) administrator give you access to this fund.

Why emerging markets? Globally, these countries are showing increased economic firepower, hungry consumers and the ability to take advantage of newly aggressive importers, exporters, manufacturers and entrepreneurs. Emerging Markets Index will give you nice exposure to several of these economies, including one of the most powerful investment markets out there -- China -- with about 20% of its assets there.

In addition, Emerging Markets has investments in Brazil (about 16%), Korea (13%) and Taiwan (11%).

To round out your foreign allocation, add some exposure to foreign small-caps.

Vanguard FTSE All-World ex-US Small-Cap Index

(VFSVX) - Get Report

is a newer fund, having launched in April 2009, that invests in small-cap non-U.S. stocks. This fund tracks a FTSE benchmark of more than 3,000 stocks, and it will give you excellent exposure to this sector of the market.

Best Vanguard Bond Funds

If you're already using Wellington as your core 401(k) investment, you don't need to diversify into another bond fund in your 401(k) thanks to its large allocation to investment-grade corporate and government bonds. But if not, it's worth putting about 10% of your 401(k) money in

Vanguard Short-Term Investment-Grade Bond Fund

(VFSTX) - Get Report

.

This fund invests at least 80% of its assets in "investment-grade" or better short- and intermediate-term bonds. It's my favorite fund at the short end of the yield curve and makes a great cash substitute for most any portfolio invested for the long haul. While it took a beating when credit markets seized up in 2008, losing about 7.2%, it completely recovered that loss in six months and ended 2009 with a double-digit return. In 2010, while the momentum has slowed, it's up a little more than 5% -- much better than a money market or short-term Treasury fund.

Vanguard's

Intermediate-Term Investment-Grade Bond Fund

(VFICX) - Get Report

is also a good choice, but it will be a bit more volatile when interest rates begin to rise.

Putting It All Together

The Vanguard PRIMECAP-managed funds are the place most of your equity money should be if they're available to you. If not, Wellington is a strong alternative. Round out your equity holdings with Vanguard MidCap Growth and Vanguard MidCap Value, shifting your weighting between the two depending on what's happening in the market.

Once you've covered your domestic stocks, put 10% to 15% of your 401(k) money in international funds, including Vanguard International Growth, Vanguard Emerging Markets Index and Vanguard World ex-US Small-Cap Index.

Lastly, for a bond buffer, unless you hold a balanced fund like Wellington, which already owns bonds, put 10% of your 401(k) money in Vanguard Short-Term Investment-Grade Bond Fund or Vanguard Intermediate-Term Investment-Grade Bond Fund.

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For more specific allocations, please see the table below. Even if some of the funds aren't available to you, you can use it as a guide to building a strong, diversified 401(k) portfolio.Remember, it's your retirement. So make sure your 401(k) plan is designed to help you, not your benefits manager.

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Dan Wiener is the editor of The Independent Adviser for Vanguard Investors. A five-time winner of the Specialized Information Publishers Foundation Editorial Excellence Award, Wiener is the founder of the Fund Family Shareholder Association and chief executive officer and chief investment strategist of Adviser Investment Management, a Newton, Mass., investment advisory firm.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.