Top T. Rowe Price Funds for 401(k) Retirement Planning | Kiplinger

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Thomas Rowe Price, who founded his eponymous investment firm in 1937, is considered by many to be the father of growth investing. So it should come as little surprise that T. Rowe Price is home to many dazzling funds that focus on fast-growing stocks.

In fact, a dozen of the best T. Rowe Price funds rank among the 100 most popular 401(k) funds.

In this, part of our annual review of popular workplace retirement funds, we will analyze these 12 T. Rowe Price funds – five actively managed funds, as well as seven products from the firm's T. Rowe Price Retirement target-date series – and rate them Buy, Sell or Hold.

Read on as we look at some of the best T. Rowe Price funds for your 401(k) plan (and weed out some of the lesser options).

Returns and data are as of Nov. 10, unless otherwise noted, and are gathered for the share class with the lowest required minimum initial investment – typically the investor share class or A share class. The share class available in your 401(k) plan may be different.

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T. Rowe Price Blue Chip Growth: BUY

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• Symbol: TRBCX
• Expense ratio: 0.69%
• One-year return: 35.3%
• Three-year annualized return: 20.0%
• Five-year annualized return: 18.3%
• 10-year annualized return: 17.3%
• Rank among the top 401(k) funds: #24
• Best for: Aggressive investors with long time horizons unafraid to hold big stakes in tech firms

We're big fans of Blue Chip Growth, which has been a member of the Kiplinger 25 since 2016. Larry Puglia has managed the fund since its mid-1993 launch. Since then, through three bear markets and several bull markets, Puglia has steered the fund to an 11.8% annualized return over the past 27 years, which outpaces the 9.7% gain in the S&P 500 index.

Puglia has a knack for finding good, fast-growing companies. Of course, that trade has worked in his favor of late, as those types of businesses have led the stock market's gains in recent years. His tilt toward firms with competitive advantages over rivals and strong multiyear growth prospects leads him naturally to big tech and consumer stocks, such as Facebook (FB), Amazon.com (AMZN), Alphabet (GOOGL) and Microsoft (MSFT) – all of which are top holdings in Blue Chip Growth.

Companies also must generate strong cash flow, have healthy balance sheets and be run by executives who spend in smart ways to be considered for the fund, which holds more than 100 stocks.

Puglia is willing to let the strongest stocks run and run: Amazon.com, the fund's top holding, comprised nearly 12% of assets at last report. Foreign stocks – mostly two Chinese firms, Alibaba Group (BABA) and Tencent Holdings (TCEHY) – now represent 8% of assets.

Puglia says he has no plans to retire. But the firm named Paul Greene associate manager in early 2020, and that move has sparked speculation that it's part of a succession plan. Morningstar analyst Katie Rushkewicz Reichart, for example, wrote recently that she thinks Puglia may step down sometime in the next two years.

Manager changes are always tough, even when they're planned in advance. That said, Greene comes off a solid stint at T. Rowe Price Communications & Technology (PRMTX), which focuses on sectors that are in Blue Chip Growth's sweet spot. During his six-year tenure, the fund returned 13.8% annualized, an average of 10 percentage points per year ahead of its competition: funds that invest in communications sector stocks.

We'll be watching closely.

Learn more about TRBCX at the T. Rowe Price provider site.

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T. Rowe Price Growth Stock: BUY

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• Symbol: PRGFX
• Expense ratio: 0.65 %
• One-year return: 34.0%
• Three-year annualized return: 18.5%
• Five-year annualized return: 17.1%
• 10-year annualized return: 16.2%
• Rank among the top 401(k) funds: #44
• Best for: Investors in search of a good growth fund

Growth Stock is one of three T. Rowe Price funds on the roster of popular 401(k) funds that focus on large, growing companies (Blue Chip Growth and Large Cap Growth are the others).

What sets this fund apart from its siblings is its higher stake in tech stocks. Nearly 34% of Growth Stock's assets, at last report, were invested in tech, compared with the typical large growth stock fund, which has 31% of assets in that sector. Among the best T. Rowe Price funds highlighted in this story, Growth Stock has the heftiest tech-stock stake.

PRGFX's returns are solid. But they aren't as good as Blue Chip Growth. Still, you may not have access to Blue Chip Growth in your 401(k) plan, and in that case, Growth Stock is a solid choice.

Joe Fath has managed the fund since early 2014. Over the past five years, Growth Stock's 17.1% annualized return beats 64% of its peers, as well as the S&P 500. Fath keeps the portfolio to a trim 85 names, and Amazon.com, Microsoft, Apple (AAPL) and Facebook are among the fund's top holdings.

Learn more about PRGFX at the T. Rowe Price provider site.

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T. Rowe Price Large-Cap Growth Class I: BUY

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• Symbol: TRLGX
• Expense ratio: 0.56%
• One-year return: 36.8%
• Three-year annualized return: 20.8%
• Five-year annualized return: 19.6%
• 10-year annualized return: 17.6%
• Rank among the top 401(k) funds: #59
• Best for: Aggressive investors unafraid to hold big stakes in tech firms

You might be less familiar with Large-Cap Growth Class I than other T. Rowe Price funds, but that's only because this institutional fund's $1 million minimum puts it beyond the reach of most individual investors.

It's a nifty offering. Taymour Tamaddon, who earned his stripes with a standout stint at T. Rowe Price Health Sciences (PRHSX) in the early 2010s, took over TRLGX in 2017. Since then, Large Cap Growth Class I, formerly known as Institutional Large-Cap Growth, has returned 26.2% annualized, well ahead of the S&P 500, which gained 14.6% over the same period.

Tamaddon runs a smaller portfolio than his colleagues at Blue Chip and Growth Stock, of 60 to 70 stocks. The top 10% holdings represent just over half of the fund's assets, and you'll recognize most of them. Amazon.com, Microsoft, Alphabet, Facebook and Apple held the top five positions in TRLGX at last report.

Learn more about TRLGX at the T. Rowe Price provider site.

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T. Rowe Price Mid-Cap Growth: BUY

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• Symbol: RPMGX
• Expense ratio: 0.74%
• One-year return: 24.4%
• Three-year annualized return: 17.0%
• Five-year annualized return: 16.2%
• 10-year annualized return: 14.7%
• Rank among the top 401(k) funds: #47
• Best for: Investors in search of a growth fund that doesn't hold Apple, Microsoft or Facebook

Mid-Cap Growth has been closed to new investors for more than a decade. But if you have access to it in your workplace retirement savings plan, and you're new to the fund, those rules don't apply.

We're jealous. We've liked this fund for a long time.

Brian Berghuis has run this portfolio of mid-cap stocks since it opened in July 1992. Since then, it has returned 13.9% annualized, which outpaces the S&P 500 by an average of 3.8 percentage points per year.

As its name suggests, Mid-Cap Growth invests in midsize companies, but Berghuis is willing to hold on to them as they grow. He homes in on firms with market values of roughly $4 billion to $30 billion. Top holding Hologic (HOLX), a health care company focused on women, has a market value of just under $20 billion. And holdings in the fund have an average market value of $16 billion. But Microchip Technology (MCHP), a stock that's been in the portfolio since 2002 according to Morningstar, has a market value of $32 billion.

There's a lot to like about RPMGX, but like a few other top T. Rowe Price funds, it seems to be moving toward a transition. Berghuis is in his 60s. Although the firm hasn't announced any coming change in manager, last October, the fund took on two new associate managers, Don Easley and Ashley Woodruff. They join associate manager John Wakeman, who has been with Berghuis from the start. New associate managers have been a harbinger of a manager change at T. Rowe Price. The firm likes to choreograph manager changes with long stretches of overlap.

This is a prudent move, and a responsible way to go about it. But when Berghuis retires, we might change our view of the fund until the new managers are tested and prove worthy. He's still in place, however, and no announcement has been made. We're staying tuned.

Learn more about RPMGX at the T. Rowe Price provider site.

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T. Rowe Price New Horizons: HOLD

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• Symbol: PRNHX
• Expense ratio: 0.76%
• One-year return: 59.9%
• Three-year annualized return: 32.0%
• Five-year annualized return: 26.5%
• 10-year annualized return: 20.9%
• Rank among the top 401(k) funds: #71
• Best for: Aggressive investors who seek exposure to fast-growing smaller companies

We're still getting used to the departure of longtime manager Henry Ellenbogen, who left in 2019 with some of the fund's key analysts to start his own firm. Ellenbogen steered New Horizons between 2010 and 2019, investing in small, fast-growing businesses. The fund's 18.7% annualized return during that time easily bested the average annual gains in the Russell 2000, a small-company stock index; the Russell Mid Cap, an index of midsize company stocks; and the S&P 500. Just saying.

That said, new manager Joshua Spencer is off to a good start. He has outpaced all of the same benchmarks, too, since taking over in April 2019. New Horizons' 36.7% annualized gain even outdoes the 15.1% average annual gain in the S&P 500.

But the fund has morphed over time.

It's more midsize- and large-company-focused than it was at the start of Ellenbogen's day. In 2013, PRNHX's stocks had an average market value of $2.3 billion. Today, the average market value of holdings is over $13 billion. When Spencer took over, he trimmed the portfolio to roughly 200 stocks, down from over Ellenbogen's 250. Meanwhile, assets are bulging. New Horizons was a monster-size small-company fund under Ellenbogen. It's even bigger now. With $36 billion in assets, it's among the biggest U.S. stock funds in the country. Morningstar now groups New Horizon with other midsize-company growth funds.

All told, it's a lot of change all at once, so we're cautiously watching.

Learn more about PRNHX at the T. Rowe Price provider site.

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T. Rowe Price Retirement Target-Date Series: BUY

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• Rank among the top 401(k) funds: #32 (TRRBX, 2020), #31 (TRRHX, 2025), #26 (TRRCX, 2030), #42 (TRRJX, 2035), #37 (TRRDX, 2040), #64 (TRRKX, 2045), #69 (TRRMX, 2050)
• Best for: Retirees that can stomach more risk for an end goal of higher returns over a long horizon

Seven of T. Rowe Price's target-date funds rank among the biggest 401(k) funds. The group includes the years between 2020 and 2050, with the 2030 fund ranking as the most popular.

This series has consistently ranked well over the past decade. All of the funds among the top 100 401(k) funds post annualize returns that rank among the top 4% or better of their respective peers over the past decade. No other target-date series has done better, as a group.

We used to say the secret sauce to T. Rowe Price's Retirement target-date funds was a hefty slug of stocks in each portfolio, a boon during the bull market that lasted all of the 2010s. But we've come to realize that it's really the team behind these funds. Jerome Clark, who leads the multi-asset division and the target-date team at T. Rowe Price, won Morningstar's outstanding portfolio manager award in 2020. He and Wyatt Lee, plus 30 others, have built a series that helps investors throughout their life – saving for 30 years and spending for 30 years.

The bigger stock stake, by the way, can mean more risk, but over time, the high returns make up for that. During the early 2020 bear market sell-off, for instance, the T. Rowe Price Retirement 2030 fund lost 27%; more than the 23% loss in the typical target date 2030 fund. But since the market bottom in March, the Retirement 2030 fund has bounced back 43%; better than the typical 2030 fund, which has climbed 34%.

There is one small catch, however. Clark is leaving the target-date team in early 2021 (he's staying on in a strategic role at the firm). Wyatt Lee, who has been at T. Rowe Price for 21 years, will step into Clark's role. We're less worried about this transition, in part because Lee has been a member of the target-date team since 2015.

Learn more about T. Rowe Price target-date funds at the T. Rowe Price provider site.