If your employer has recently added new fund options to your 401(k) plan, you may be unsure about how to evaluate those offerings in the context of the funds you already own. While it may be tempting to play it safe and stick with what you already have, that could be a mistake, as new investment options may help you diversify your portfolio, lower your expenses and upgrade the quality of your retirement savings plan.

More plan sponsors are either adding new funds to their existing 401(k) plans or considering changing 401(k) providers, due to recent Department of Labor rules that have increased transparency around 401(k) fees, says Jeff Nauta, a financial adviser with Henrickson Nauta Wealth Advisors in Belmont, Mich.

"These new rules have forced plan sponsors to be more cognizant of the fees they are charging, so more lower-cost options are being added to plans, including index funds," he says.

When analyzing any new fund options that have been added to your 401(k) plan mix, consider them in relation to your overall investment objectives and your asset allocation strategy. Since it's your retirement on the line, it's important to take an active role in managing your investments within the 401(k) plan, says Richard E. Reyes, a CFP professional with The Financial Quarterback in Maitland, Fla.

Decide between a 1-fund or multifund solution

Target-date funds, asset allocation funds or life cycle funds are popular choices in retirement plans because they allow consumers to automate their investing strategy and forget the headaches associated with selecting and managing a portfolio of appropriate fund options. "The question becomes, do you want to pick funds, or would a risk-based or life cycle fund, an all-in-one solution, work better for you?" says Nauta.

These funds aren't risk-proof, and they vary widely in the types of funds they hold and the ways they manage asset allocation in the years leading up to and during retirement. But they do solve the problem of selecting and monitoring a larger group of funds on an ongoing basis, Nauta says.

Consider how your portfolio is diversified

Just because a fund is new to your 401(k) plan doesn't mean it's going to improve your portfolio in a meaningful way. Even if a fund has a name that sounds like it is much different from the funds already in your portfolio, a deeper investigation may reveal that it isn't different enough to make it a worthwhile investment.

"The names of funds can sometimes be ambiguous, and you often need to look closer to understand how a fund actually invests its assets," says Ryan Franklin, a CFP professional with Moss Adams Wealth Advisors in Yakima, Wash. "Avoid buying multiple funds that have similar investment holdings; evaluate the funds, and choose the best one instead."

When examining new funds, check out their investment objective and strategy. Sites such as Morningstar and Yahoo Finance offer free memberships with access to a wide variety of data on thousands of mutual funds. In addition, your 401(k) plan likely has an investment site where you can gather information about fund options.

Morningstar's fund comparison tool allows you to compare several funds side by side, so you can see their holdings, expenses, performance and other data. That information will help you determine whether a new fund in your 401(k) plan is different enough from an existing fund to warrant adding it to your portfolio.

Check out the fees of the new fund options

When considering making a change in your 401(k) plan, expenses are a key consideration, says Nauta. The more expensive a fund, the more it impacts a fund's return, which adversely affects the growth of your retirement assets.

Fund expenses are expressed in terms of percentages and aren't always easy to figure out. Bankrate's mutual fund fees calculator can help you understand the costs of a given fund.

While you certainly don't want to stuff your portfolio with funds that have similar objectives and strategies, it makes sense to replace an existing fund that is expensive with a similar fund that costs less.

Investigate long-term performance

While fund performance is an important variable in the investment decision, too many investors focus on recent performance when selecting mutual funds. Short-term numbers -- one month, six months or even a year -- don't give you much insight about the quality of a fund.

Longer-term returns -- those from three, five or even 10 years -- tell the story of how a fund manager has managed a fund in a variety of market environments, says Nauta. It can be easy for a manager to perform well when everything's going well with the market and the economy, but when things aren't so good, how does the fund perform relative to its benchmark?

Franklin suggests comparing funds to other funds in the same peer group -- for example, a large-cap fund with others in the same category -- which will give you a sense of how the fund has performed relative to similar funds.

Choose between actively managed and index funds

The emphasis on containing costs is driving more plan sponsors to add index funds to their 401(k) plan lineups, Nauta says. "Index funds tend to be lower cost than actively managed funds, and that's a good thing for investors, who will save money."

In addition, index funds don't try to outperform the market -- a difficult task at the best of times. Instead, index funds attempt to replicate the performance of a particular market index. That index might reflect the market as a whole, such as the Russell 3000 index, or it may focus on the largest companies in the United States, as the Standard and Poor's 500 does.

Research reveals that most actively managed mutual funds -- those with managers who pick stocks, bonds, commodities or other securities according to a specific strategy -- don't outperform the market. So picking index funds can work for your portfolio because you'll get the performance of certain sectors of the market at a lower cost, says Nauta.

Copyright 2013, Bankrate Inc.