The T. Rowe Price Blue Chip Growth Fund (TRBCX 0.09%) invests in well-known companies with above-average potential for earnings growth. With a strong record of performance and reasonable fees, this fund can be a good fit in the investment strategy of retirement savers who are looking to grow their nest eggs.
What does the fund invest in?
As I mentioned, the T. Rowe Price Blue Chip Growth Fund invests in well-known companies with higher-than-average growth potential. As is the case with most growth investments, the focus is on long-term capital appreciation as opposed to current income. As you'll see in a bit, most of the fund's stocks don't pay dividends, and since capital growth is the priority, the fund doesn't make regular distributions to shareholders.
Image source: Getty Images.
The fund owns 141 different stocks, and the 10 largest holdings represent approximately 38% of its total assets:
|
Company |
Symbol |
Percentage of Total Assets |
|---|---|---|
|
Amazon.com |
AMZN |
6.89% |
|
Alphabet class C |
GOOG |
4.42% |
|
|
FB |
4.37% |
|
The Priceline Group |
PCLN |
3.61% |
|
Microsoft |
MSFT |
3.13% |
|
Danaher |
DHR |
3.10% |
|
Visa |
V |
2.87% |
|
Alphabet class A |
GOOGL |
2.61% |
|
MasterCard |
MA |
2.59% |
|
Allergan |
AGN |
2.19% |
Source: T. Rowe Price.
How much does it cost?
The fund has an overall expense ratio of 0.71%, which is actually below the 0.81% average for growth-stock funds. What this means is that, if you invest $10,000 in the fund, your cost will be $71 for the year.
This is a high cost relative to index stock funds, such as a mutual fund that simply tracks the S&P 500. In this group, the average is just 0.11%. However, I feel that a higher expense ratio is justified if a fund has proven its ability to beat the market, and the T. Rowe Price Blue Chip Growth Fund has done that, as I'll explain in the next section.
Performance
The best way to judge the performance of a large-cap stock mutual fund is to compare its performance to a broad market index, such as the S&P 500.
|
Time period |
T. Rowe Price Blue Chip Growth Total Return (Annualized) |
S&P 500 Total Return |
|---|---|---|
|
1-year |
-1.60% |
3.99% |
|
3-year |
+13.07% |
11.66% |
|
5-year |
+12.84% |
12.10% |
|
10-year |
+8.82% |
7.42% |
Performance data source: TD Ameritrade.
While the fund has lagged the market over the past year, it has outperformed over all three of the longer time periods -- which is what we're more concerned with, as long-term investors.
It's important to mention that a mutual fund's past performance doesn't guarantee its future results. Just because the T. Rowe Price Blue Chip Growth Fund delivered strong performance over the past couple of decades, it doesn't mean it will continue to do so. However, a record like this is a good indicator that it's likely to produce good results going forward.
How risky is the fund, and is it a good choice for retirement savings?
Admittedly, the T. Rowe Price Blue Chip Growth Fund is not a low-risk fund, and therefore isn't appropriate for people with short investment time frames and/or a current need for their savings. However, for investors with a long time until retirement -- say, 10 or more years -- the fund's strong record of performance indicates that the reward potential justifies the risk.
If you want more stock allocation in your portfolio and are willing to ride out the market's ups and downs, this could be a smart choice for you.
