A "401(k)" is not a monolithic entity. In practice, most employers offer a choice of funds, with the most popular being a year-targeted fund that rebalances between equities and bonds as you get closer to retirement. Having said that, you can probably dump your entire portfolio into government bonds, small cap stocks, or euro futures.

And your proposed alternative? Please provide at least 50 years of historic returns

> …says a lot about what it is

Doesn’t it say that it’s a retirement fund, intended to be saved until retirement age? The 10% penalty is little more than a wrist slap level deterrent, too. It’s usually like ~1 year of returns. Not a huge deal if you need to dip into it.

(There’s plenty to criticize about the whole 401k system of retirement accounts. But these criticisms seem misguided)

You can move your 401k money between several funds at any time.