T. Rowe Price is regarded as one of the best mutual fund managers in the business. At the end of 2015, its clients entrusted it with more than $760 billion of their hard-earned wealth. But with more than 50 stock funds under its umbrella, and a host of other bond funds, blended funds, and target-date funds, selecting the right ones for your retirement account can be a headache.
It doesn't have to be so hard to choose. These three funds have proven to be solid performers, relatively inexpensive, and fitting for a retirement account:
1. T. Rowe Price Dividend Growth Fund
Over its history, the T. Rowe Price Dividend Growth Fund (NASDAQMUTFUND:PRDGX) has proven capable of beating the broad market by focusing on dividend stocks that have the potential to raise their dividends over time. Fund management takes a buy-and-hold approach, only turning over about 25% of the portfolio each year.
Over the 10-year period leading up to March 31, 2016, the fund has outperformed the S&P 500 Index by approximately 0.5 percentage points each year. It fared even better over a 15-year period, in which it outperformed by about 0.7 percentage points.
Active management comes at a price, however. Annual net expenses add up to about 0.64% of assets each year, but the fund's size at less than $5 billion of assets suggests that management still has plenty of opportunity to be nimble and select among less popular stocks.
2. T. Rowe Price Equity 500 Index Fund
There's nothing fancy to see here. The T. Rowe Price Equity 500 Index Fund (NASDAQMUTFUND:PREIX) simply tracks the performance of the S&P 500 Index, which is roughly comprised of the 500 largest companies on U.S. stock exchanges. By definition, this fund will never be a star performer, as it's designed to simply track the returns of that broad index, minus a small fee, amounting to about 0.27% of assets.
Note that while its expense ratio is very low, other S&P 500 index funds can be even less expensive. Read through your investment choices carefully to see if you can find an even lower-fee fund. If you can't, getting "stuck" with this one certainly isn't the worst possible outcome.
Being less expensive than virtually all actively managed funds, this S&P 500 index fund already give you a leg up on the competition, in that it has a lighter fee weighing down on your annual returns.
3. T. Rowe Price International Discovery Fund
Diversify your portfolio by looking outside the United States' borders. The T. Rowe Price International Discovery Fund (NASDAQMUTFUND:PRIDX) selects from small- and mid-cap companies all around the world, and seeks to generate capital appreciation in emerging and developed markets alike. As of early 2016, Japanese stocks made up 22% of the portfolio, followed by U.K. stocks at 17.4% and Chinese stocks at 8%.
The fund has done well in its category, outperforming competing funds by more than 1 percentage point over periods as short as three years and as long as 15 years.
The fund is small enough to be able to venture into less-covered regions, and into smaller-capitalization stocks with assets of less than $5 billion. Unfortunately, it carries a net expense ratio of about 1.2% annually -- on the high end for a domestic stock fund, but hardly out of line for an actively managed international fund.