T. Rowe Price is one of the largest US investment firms, offering mutual funds, 529 plans and investment management for individuals, separate accounts, pensions and retirement funds, and institutional investor clients. The firm has more than 5,000 employees around the world and manages more than $570 billion.
History of T. Rowe Price and Thomas Rowe Price, Jr.
A publicly traded company since 1986 (NASDAQ: TROW), T. Rowe Price was founded in 1937 by Thomas Rowe Price, Jr., of Baltimore, Maryland. A chemist who became fascinated by finance, he held positions at a few investment firms but wanted to do things differently on many fronts. His first big idea was something called growth investing. Think of it as investing in the next big thing. He believed that all stocks had a growth phase. If you could determine when a stock was in it's growth phase, or better yet, just before it got there, you could make the most money from the stock over the long term. The trick was finding young companies with potential.
To find these stocks, Price used analysis. Earnings analysis, competitive analysis, regulatory analysis, to find companies that fit into a growth sweet spot. Once there, he invested with a long-term focus as long as it continued to grow. The investment approach was a straightforward one: long-term focus, in-house investment research, and risk management.
"I realized that most of the big fortunes in the country had resulted from investing in a growing business and staying with it through thick and thin," said Price.
Price brought that investment approach to individual investor clients, and helped create a client-focused investment advice model. As a money manager, Price could make money helping other investors make money. He was an early adopter of a fee-based payment model, charging a percentage of the assets he managed. This model is used by many financial advisers today (1% of fund assets is a reasonable price for independent, fee-based advice.
T. Rowe Price Mutual Funds
T. Rowe Price started its first mutual fund, the T. Rowe Price Growth Stock Fund (Ticker: PRGFX) in 1950. Over that decade, the fund returned 500%, a better cumulative 10-year performance record than any other fund in the country. In the 1960s, Price again looked like a visionary by looking into small-company growth opportunities, which later tended to pay off in years where large companies did not perform as well, and had a better risk profile. In 1969, it created the first natural resources fund, the New Era Fund (Ticker: PRNEX). Today, the firm offers more than 75 mutual fund options.
The way people paid for T. Rowe Price mutual funds was revolutionary for its time. Price offered no-load funds, those without a built-in commission when you buy or sell fund shares. Today, no-load funds are essential for investors looking to cut expenses. T. Rowe Price mutual funds are among the lowest priced funds in the industry, including the actively managed funds. More than 90% of T. Rowe Price funds have expense ratios below their category average, according to Lipper Inc., as of year-end 2011. Because the investors behind the fund have a long-term strategy, internal trading costs are kept low.
The funds tend to perform well. According to Kiplinger, almost half of T. Rowe Price's 112 portfolios boast five-year annual returns ranking among the top 25% in their categories.
T. Rowe Price itself is an investment. It entered the Standard & Poor's 500 Index in 1999. The firm celebrated its 75th anniversary in 2012.
T. Rowe Price as Investing Equalizer
If your employer-sponsored retirement plan is administered by T. Rowe Price, there's all the more reason to take advantage of it. Or, if you are looking for somewhere to save or invest outside of a 401(k), T. Rowe Price is an option to consider alongside Vanguard, Fidelity and Charles Schwab. Aside from the low costs and consistent performance record, T. Rowe Price also offers the average investor low investment minimums. You can start a taxable account with the firm with as little as $2,500, or an IRA with $1,000. If you sign up for an automatic investment program, having regular contributions withdrawn from your account into your investment plan, you can get started with as little as $100 a month.
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