The 5 Best T. Rowe Price Funds

A List and Model Portfolio Allocation

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T. Rowe Price is one of the best no-load mutual fund companies in the U.S. Although it is smaller in size and selection than Vanguard and Fidelity, it offers plenty of high-quality no-load funds that can allow an investor to build a great portfolio within one fund family. Let's look at which T. Rowe Price Funds are the best options, and how an investor can build a portfolio with them.

No-Load Fund Definition

A no-load fund is one sold with no commission or sales charges.

Start With the Best Portfolio Structure

Before you choose the best T. Rowe Price funds to use for your portfolio, it's helpful to review a simple but effective portfolio structure called core and satellite. In this structure, a portfolio is built around a "core holding," such as a large-cap stock index mutual fund, which represents the largest portion of the portfolio. The other types of funds—the "satellite holdings"—each comprise smaller portions of the portfolio to finish the whole. The satellites typically consist of funds from various categories, such as foreign stock, small-cap stock, bond funds, and sometimes sector funds.

The primary objective of this portfolio design is to reduce risk through diversification (putting your eggs in different baskets) while achieving reasonable returns to meet the investor's long-term goals.

Sample Portfolio of the Best T. Rowe Price Funds

T. Rowe Price offers a range of mutual funds, including actively managed and index funds, large-cap funds and small-cap funds, as well as sector funds and their top-notch target-date funds.

Here is a list of some of the best T. Rowe Price Funds, along with a suggested percentage for a model portfolio:

  • 35% T. Rowe Price Total Equity Market Index (POMIX): Large-cap stock index
  • 15% T. Rowe Price International Stock (PRITX): Foreign stock
  • 10% T. Rowe Price Diversified Small-Cap Growth (PRDSX): Small-cap stocks
  • 5% T. Rowe Price Health Sciences (PRHSX): Health sector stock
  • 35% T. Rowe Price New Income (PRCIX): Bonds

Choosing Your Fund Mix

This particular blend of T. Rowe Price funds is an example of a moderate portfolio, which is appropriate for an investor with a medium risk tolerance and a time horizon of at least five years. Moderate investors are willing to accept periods of moderate market volatility (ups and downs in account value) in exchange for the possibility of receiving returns that outpace inflation by a significant margin. The asset allocation breakdown is approximately 65% stocks and 35% bonds.

Bonds are a good way to offset the risk of stocks in your portfolio, as stocks and bonds tend to have an inverse relationship when the market goes up or down.

The use of sector funds such as PRHSX health sector stocks is optional. If you add other sectors, it's a good target to keep the allocation around 5% for each sector and try not to exceed a total of 15% allocation to sectors (5% allocated to three different sector funds). This prevents your portfolio from being too heavily dependent on the performance of any given part of the economy.

Although this portfolio has five funds in it, there's no hard rule about the ideal number of funds to build a portfolio. A good range is somewhere between three and seven funds. No matter which T. Rowe Price funds you choose, be sure you are using a diverse mix of mutual fund categories in order to create a well-balanced portfolio.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.