Most 401k plans have a "menu" of funds to choose from-some are limited, 10-15 funds, while other plans will have a lot more options.  Generally every plan will have a balanced fund or some sort of target-date fund (lifecycle fund).  You'll see these same type of funds inside most brokerage IRA accounts.  The balanced funds were extremely popular in the early 90's and the new target-date funds are commonly used now.  Both are good options, what option is better?  The NY Times provides some data from a recent financial publication.

BLAND PRAISE Balanced funds and target-date funds — balanced funds that are more conservative over time — have become the two most popular default options in the retirement plans that companies offer employees, Financial Planning notes. The question is, Which performs better?

Craig L. Israelsen, who teaches personal finance at Brigham Young University, tested hypothetical portfolios that mirrored the holdings of most balanced and target-date (also called life-cycle) funds. In the balanced portfolio, 50 percent was invested in companies in the United States, 10 percent in companies outside the United States, 30 percent in bonds and 10 percent in cash. The target-date fund began with 90 percent equities and 10 percent fixed-income investments, steadily shifting more funds to fixed-income over time, and ending with a mix of 40 percent in equities and 60 percent in bonds and cash.

Mr. Israelsen tracked how the two funds would have done from 1960 through 2007. The winner by a small margin (9.59 percent to 9.26 percent) was the target-date fund.

Both types of fund “generally deliver middle-of-the-road returns compared with the core individual assets in an accumulation portfolio; they usually outperform bonds or cash, and underperform one or both of the equity components,” he writes. “As such, either a balanced or target-date fund may appear relatively bland. But, bland is good. Investing isn’t supposed to be exciting.”