As an investor, you can create a mutual fund portfolio that includes offerings from a vast array of fund firms. But many investors like to keep things simpler and potentially cheaper by using funds from only one giant fund company—often Vanguard, Fidelity or T. Rowe Price. To help our readers who want to stick with one of these firms, Bottom Line Personal asked three investment experts to tell us what they consider to be the best-of-the-best in-house funds available to new investors at each of the above companies. The experts did not consider index funds, which are very similar at all three fund firms. Here are the actively managed funds they chose—across a variety of investing categories—that you can use to build or augment your portfolio.
Vanguard is the biggest fund company in the US, with $4 trillion in assets. Although it is best known for its index funds, the company also offers 68 actively managed funds, most with far lower fees than those charged by other fund firms in similar categories.
Equity Income (VEIPX) invests in about 150 to 200 stocks, primarily of large US companies with strong cash flow that pay above-average dividends. Over the past 10 years, the fund’s performance ranks in the top 5% of its category, and its annual expense ratio is 0.26%. Performance: 8%.* Recent yield: 2.7%.
Selected Value (VASVX). This fund, which owns mostly mid-cap stocks, uses three high-quality subadvisers, each looking for deep-bargain stocks and holding them for long periods but with three somewhat different approaches. One subadviser looks for strong balance sheets but above-average yields…another for hidden earnings potential…and the third for companies that will pull out of short-term
problems. Performance: 7.8%. Recent yield: 1.4%.
Health Care (VGHCX). This sector has great long-term potential thanks to the aging populations in many nations. The fund focuses on large pharmaceutical and medical-equipment companies and waits to buy until the stock prices make them bargains. Performance: 11.3%.
Global Equity (VHGEX) invests nearly half its assets in US stocks and spreads its foreign investments among giant, large, medium-sized and small companies, including 8% of its investments in emerging markets recently. Performance: 4%. Recent yield: 1.4%.
International Growth (VWIGX) invests mostly in large-cap growth stocks in developed nations but keeps about 20% of its assets in emerging-market companies. Its performance ranks in the top 3% of its category over the past year and the top 15% over the past 10 years. Performance: 3.3%.
Intermediate-Term Investment-Grade (VFICX) keeps 60% to 80% of assets in high-credit-quality corporate bonds but has been able to boost yields and capital appreciation by investing the rest in mortgage-backed securities, foreign bonds and US Treasuries and government agency debt. Performance: 5.1%. Recent yield: 2.7%.
Fidelity, which has $1.7 trillion in mutual fund assets and 220 actively managed funds, is reluctant to close a fund to new investors even when its assets have grown unwieldy. But even some of the biggest funds deliver impressive returns and consistency.
Contrafund (FCNKX). This large-cap growth fund has swelled to $107 billion in assets. But shrewd stock-picking by Will Danoff, who has been the fund manager since 1990, has enabled the fund to outperform the Standard & Poor’s 500 stock index by an annualized 1.3 percentage points over the past decade. Performance: 9%.
Large Cap Stock (FLCSX) seeks mostly large-cap undervalued stocks and lately has focused on financial-services, health-care and energy stocks. There typically is a smattering of medium-sized and small companies as well. Its 10-year returns rank in the top 6% of its category. Performance: 8.6%. Recent yield: 1.3%.
Low-Priced Stock (FLPSX). Since the fund was launched in 1989, manager Joel Tillinghast has taken a patient, low-risk approach with little annual turnover. The fund limits its new purchases to stocks that sell for $35 or less per share. Nearly 40% of $39 billion in assets is in mid-cap stocks, with nearly one-third in large-cap and the rest in small- and micro-cap stocks. And 36% of assets are in foreign stocks. Performance: 7.8%.
International Growth (FIGFX). This fund hunts mostly for stocks of large companies with strong growth potential from developed nations, including US stocks, which accounted for 22% of assets recently. Five-year performance: 6.5%.
Total Bond (FTBFX). The fund invests 80% of its holdings in a diversified mix of high-quality bonds and puts its remaining assets in riskier fare such as high-yield and emerging-market bonds. This strategy has helped the fund outperform the benchmark Barclays US Aggregate Bond Index by nearly one-half percentage point a year over the past decade. Performance: 4.8%. Recent yield: 2.6%.
T. Rowe Price is smaller than the other two fund firms, managing $811 billion in assets and overseeing 128 actively managed funds, but still is one of the most popular firms for in-house funds. About 90% of T. Rowe Price actively managed funds have outperformed funds in the same categories over the past 10 years.
Blue Chip Growth (TRBCX). Larry Puglia, manager since the fund’s inception in 1993, looks for US blue chips with earnings that can grow strongly even if the global economy continues to grow slowly. It has outperformed the S&P 500 annually by nearly two percentage points, on average, over the past 10 years. Performance: 9.6%.
Dividend Growth (PRDGX) focuses on large-cap US growth and value stocks, especially those that can keep raising dividends over time and seem reasonably priced. Performance: 7.9%.
QM US Small-Cap Growth Equity (PRDSX) uses computer models to help find companies with decent valuations and solid earnings growth. This quantitative approach has led to performance in the top 2% of its category over the past decade with less than average volatility. Performance: 10.7%.
International Discovery (PRIDX). The fund invests mostly in rapidly growing small- and mid-sized companies in countries ranging from Japan and the UK to China and India. Performance: 5.6%.
Spectrum Income (RPSIX). This fund spreads its investments over 15 income-producing T. Rowe Price funds, including core, high-yield, foreign and inflation-protected bonds, floating-rate loans and intermediate-term Treasuries. Performance: 5.2%. Recent yield: 3%.
*Performance figures are annualized returns for the 10 years through March 10, 2017, unless otherwise noted.
