These funds stand out in a crowded market.
When you’re choosing how to invest for retirement, T. Rowe Price funds are a recognizable name. T. Rowe Price is a mutual fund company that manages more than $1 trillion for investors and competes with other large brokerages such as Vanguard and Fidelity. “Their secret seems to be the sterling corporate culture as most of their investment pros spend their entire career there and follow the company expectations of above-average, long-term returns and below-average expense ratios,” says Steve Azoury, financial advisor and owner of Azoury Financial. “That’s a good philosophy to keep everyone happy.” With a wide range of mutual fund options to choose from, it’s possible to build a customized retirement portfolio centered on your needs and goals. Here are seven of the best T. Rowe Price funds to consider when investing for retirement.
T. Rowe Price Blue Chip Growth Fund (ticker: TRBCX)
Todd Rosenbluth, director of mutual fund and exchange-traded fund research at CFRA, says as the name implies, the T. Rowe Price Blue Chip Growth Fund has a growth tilt to it with heavy exposure to the information technology, consumer discretionary and health care sectors. Top holdings include Apple (AAPL) and UnitedHealth Group (UNH). On a five-, 10-, and 15-year basis, the fund has been in the top quartile for performance, giving it “a great track record, while incurring about the same risk as its peers,” he says. TRBCX has a low annual expense ratio of 0.69%, or $69 for every $10,000 invested, which Rosenbluth says is important for people holding this fund for the long term.
T. Rowe Price Growth Stock Fund (PRGFX)
Along with TRBCX, the T. Rowe Price Growth Stock Fund is a popular holding in 401(k) portfolios, Azoury says. This is another fund with a strong long-term track record, having returned 16.8% annualized for the past 10 years. Manager Joseph Fath has been with the fund since 2014. PRGFX is overweight on consumer cyclical and communication services compared to its peers. Along with technology, those three sectors make up the bulk of exposure. The fund’s largest holding is Amazon.com (AMZN). PRGFX has a low 27% turnover rate, meaning only 27% of stocks are changed in a given year, and it comes with a low expense ratio of 0.65%.
T. Rowe Price Large-Cap Growth Fund (TRLGX)
Taymour Tamaddon, lead portfolio manager of the T. Rowe Price Large-Cap Growth Fund, seeks companies that have above-average earnings and cash flow growth and can keep earnings up even during economic slowdowns. He selects firms that operate in lucrative niches in the economy, such as Salesforce.com (CRM). A huge fund with $21 billion in assets under management, Azoury notes TRLGX has an average return of around 18% for the past 10 years. “As their commercials show, the company goes for consistency. They never ‘go for it’ and thus they don’t get burned,” he says. “Their customers seem to like it and continue to enjoy this long-term growth strategy.” TRLGX has a low expense ratio of 0.56%.
T. Rowe Price Dividend Growth Fund (PRDGX)
Craig Bolanos, CEO of Wealth Management Group, says there are two key pillars to retirement income: living off portfolio income and having a plan to increase that income over time. He likes that the T. Rowe Price Dividend Growth Fund allocates to market sectors that are “relevant to the new COVID economy,” which includes technology, health care and consumer discretionary, but that also means companies with a history of increasing dividends. “What people need to get retired and stay retired is to grow their income, while at the same time growing their capital base,” Bolanos says. “Dividend Growth checks both of those boxes for us and of course, they have a very strong management team in place.” The fund comes with an expense ratio of 0.62%.
T. Rowe Price International Stock Fund (PRITX)
The T. Rowe Price International Stock Fund is another solid performer, Rosenbluth says, with a strong, risk-adjusted track record that outperforms its peers. “It’s notable that this has both developed and emerging markets as opposed to one or the other,” he says. This fund includes holdings such as Alibaba Group (BABA), Taiwan Semiconductor Manufacturing Co. (TSM) and Unilever (UL). “It’s common with active funds that they don’t stay only within a geography but will go where the opportunities arise,” Rosenbluth says. He adds that the 0.8% expense ratio is also low for an international fund.
T. Rowe Price High Yield Fund (PRHYX)
Investors with a lengthy time horizon can afford a higher risk tolerance, “thus high yield could make sense within the fixed-income portion of the portfolio,” Rosenbluth says. The T. Rowe Price High Yield Fund has a relatively new manager who has been at the helm for a little less than two years, but the performance has been relatively good. PRHYX has a yield of 5.24% and a low effective duration of 3.18 years. “It’s a strong high-yield growth fund,” he says. In terms of credit quality, the fund has the bulk of its portfolio in assets rated BB and B, with a slightly higher weighting to the latter than its category. PRHYX comes with an expense ratio of 0.72%.
T. Rowe Price Emerging Markets Bond Fund (PREMX)
Bolanos prefers actively managed bond funds because a strong manager can add value. The manager of the T. Rowe Price Emerging Markets Bond Fund, Michael Conelius, has helmed the fund for more than 20 years. Bolanos includes this emerging-market bond fund in clients’ portfolios because of the higher yields and the exposure to growing economies. He says PREMX gives investors income along with the opportunity of appreciation. Just like the T. Rowe Price Dividend Growth Fund on the equity side, PREMX gives investors income with appreciation. “Those are the two components why the emerging-market bond fund fits a part of someone’s portfolio,” Bolanos says. PREMX has a yield of 4.63% and an effective duration of 8.14 years. PREMX has the highest expense ratio among the funds on this list, at 0.9%.
The seven best T. Rowe Price retirement funds:
— T. Rowe Price Blue Chip Growth Fund (TRBCX)
— T. Rowe Price Growth Stock Fund (PRGFX)
— T. Rowe Price Large-Cap Growth Fund (TRLGX)
— T. Rowe Price Dividend Growth Fund (PRDGX)
— T. Rowe Price International Stock Fund (PRITX)
— T. Rowe Price High Yield Fund (PRHYX)
— T. Rowe Price Emerging Markets Bond Fund (PREMX)
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Update 12/11/20: This story was published at an earlier date and has been updated with new information.