Investing has become a necessity in our modern world. Gone are the days of saving money under a mattress for retirement. In order to create wealth, you must either already have some to begin with, or you must make some kind of investment. Life’s goals and milestones, like retirement, education, and vacations, all require a lot of money and careful planning. If you don’t know the first thing about investing, it is a good idea to educate yourself on the basics. An even better idea is to seek help from the professionals.
There are so many established investment companies out there that can guide one towards life’s many goals. One of the most prestigious global investment companies is T. Rowe Price. Based in Baltimore, Maryland, the company manages over $640 billion in assets, as of October 2013. Three quarters of total assets under management are dedicated to equity and balanced strategies. The company has offices in 12 countries around the world, and serves clients in 30 countries. Price offers a variety of retirement and brokerage solutions, as well as savings plans, advisory planning, and investor services.
Like many companies, they also offer an assortment of mutual funds that have no loads, sales charges, or hidden fees. Their mutual fund managers have an average of 14 years of experience. The firm trades on NASDAQ, and offers over 28 domestic stock, 28 bond, 18 international, 20 asset allocation, and 6 money market funds. Customers have the option of opening an account online, over the phone, or in person at one of their investor centers. One of downsides I found in my research was that T. Rowe Price only has 6 investor centers in the US.
This presents an obstacle to a potential client who does not live near an investor center, and does not want to deal with an investment company online or by phone. The trend these days, however, is to open an account online. T. Rowe Price makes it very easy to do so. BRIEF HISTORY T Rowe Price was established in 1937 by Thomas Rowe Price, Jr. During the 30s, the common practice was to charge a commission on every transaction. To stand out among the competition, Price decided to charge a fee based on assets under management. In this way, if the client prospered, so would the company.
Price is best known for developing the growth stock style of investing, for which he has been called “the father of growth investing”. He sought to emphasize companies whose earnings and dividends could be expected to grow faster than inflation and the overall economy. Prior to establishing the company, Price had more than a decade’s worth of experience during the 1920s at a brokerage firm in Baltimore, which is now known as Legg Mason. In 1950, the company’s first mutual fund, T. Rowe Price Growth Stock Fund, was established. A year later, the firm began investing in US small-cap equity.
In 1974, the company began defined contribution plans. In 1986, to help secure the firm’s long-term financial stability, T. Rowe Price went public. Shortly after, they opened offices in Hong Kong, Buenos Aires, and Singapore. The company was then added to the S&P 500 Index in 1999. In 2003, Target-date Retirement Funds were added. These funds reached $8 billion within two years. The company’s business model has remained consistent since inception. It has a relatively low-risk operating model, which emphasizes fees over commissions.
The investment approach avoids trends, like the 1990s Internet bubble. In 2008, T Rowe Price had to alert 35,000 clients that their names and Social Security numbers were compromised after some of the company’s files were stolen from one of their service providers. To deal with the crisis, the company offered those affected a free one-year subscription to an online credit monitoring service, as well as identity theft insurance up to $25,000. SOCIAL RESPONSIBILITY and EMPLOYEE FOCUS T. Rowe Price is 15% employee owned, and there are currently about 5400 employees.
Their portfolio managers have an average of 19 years investment experience and 13 years tenure with the firm. Associates are trained with a mix of hands-on experience and formal learning. The company emphasizes the need to invest in their associates in order to attract and keep associates who will work towards the goals of the company. Besides traditional benefits, employees can take advantage of a tuition assistance program, opportunities to volunteer in the community, bonuses, and even an adoption expense reimbursement program. The company also promotes diversity and inclusion.
They have established a Diversity Advisory Council, an Ethnic Diversity Roundtable, and a Women’s Roundtable. These programs are fairly new; established in 2007, they were designed to focus on mutual respect among employees, as well as conflict resolution. The company has definitely set a standard for being a great place to work. T. Rowe Price was ranked One of the “Top 50 Employers” in 2013 by Equal Opportunity Magazine; this was based on votes from readers who viewed the company as one which they would like to work for or “believe would provide a positive working environment for members of minority groups”.
In 2012, Price was ranked first in people management and quality of management, and ranked second in social responsibility, according to FORTUNE Magazine’s “Most Admired Companies” report. This was the company’s third time making the list. The company maintains a dedication to ethics, community involvement, and environmental sustainability. In addition, T. Rowe Price emphasizes the importance of financial education in the community. In 2009, Price collaborated with Walt Disney, and launched “The Great Piggy Bank Adventure”.
This is a free online board game, as well as an exhibit at Epcot in Walt Disney World; the focus of the game is to help young kids set a financial goal and give them easy-to-understand concepts of financial planning. I think this is particularly noteworthy because I feel it is very important that children get some kind of financial education foundation early on. On October 7 2013, it was announced that T. Rowe Price partnered up with Junior Achievement USA, and developed moneyconfidentkids. com. This website is a go-to resource for financial education for parents, educators, and students.
The partnership was made possible through the T Rowe Price Foundation, which awarded a $250,000 grant to Junior Achievement USA. Incorporated in 1981, the T Rowe Price Foundation focuses on enhancing the success of the communities where T. Rowe Price associates live and work. The Global Matching Gift Program was established to match associate donations, and awards direct grants to institutions that benefit the community. Reducing environmental impact is very important to the company. In 2007, the Environmental Sustainability Committee was established. As a result, T.
Rowe Price has measured their energy usage and greenhouse gas emissions, and has made considerable progress in decreasing them. T. Rowe Price is also committed to maintaining energy-efficient and environmentally friendly buildings. RETIREMENT PLANS/PRODUCTS Retirement is something everyone should be thinking about decades before the time comes, and T. Rowe Price has many products and services dedicated to retirement. The company focuses not only on younger people who are just starting to save for retirement, but also those who are changing careers, nearing retirement, and currently enjoying retirement.
Traditional and Roth IRAs are offered, and the company offers assistance with choosing the appropriate type of IRA. Also offered are Spousal and Inherited IRAs. Many people are taking advantage of greater tax-deferred growth potential by converting their Traditional IRA into a Roth IRA, which T. Rowe Price also assists with. Online retirement tools, such as a retirement income calculator, social security benefits evaluator, and Traditional versus Roth IRA comparison tool, are offered. They are easy to use and have step by step instructions so almost anyone can take control of their retirement planning.
Small businesses also have many options at T. Rowe Price. SEP-IRA, SIMPLE IRA, and Individual 401(k) Plans are offered to self employed individuals, small business owners, and sole proprietorships. One of the most attractive and low-maintenance retirement plan products offered by T. Rowe Price, as well as many other investment firms, is the target-date mutual fund. This type of fund is tailored for people who prefer passive investing. It automatically adjusts its asset mixes, and becomes more conservative as retirement age approaches. There is some criticism that
these types of funds can be too generic to take personal preferences into account. According to Morningstar, however, the demand for target-date mutual funds is steadily increasing and so far, shows no signs of slowing. Fees, the “glide path” (formula used to adjust the asset-allocation mix), and performance are all aspects that one must look at when deciding on a fund. Recently, the SEC and the Labor Department have “proposed regulations to increase disclosure of target-date fund fees, their underlying investments and the speed with which their allocation, or glide path, changes over time.
” Signs of a global economic rebound are helpful when deciding whether and what to invest in. The market peaked in September 2013 when the Fed announced it would not taper its asset purchase program, but soon after dropped as a result of the budget stalemate in Washington. It is important to pay attention to what is happening in the country and in the world when looking at and deciding upon potential investment products. At my age, the T. Rowe Price’s Retirement 2050 Fund would be the most ideal for me, based on my expected age of retirement alone.
The Lipper Mixed-Asset Target 2050 Funds Average is a good benchmark for comparison purposes. Other comparable target-date funds include the TIAA-CREF Lifecycle Index, Vanguard Target Retirement, and Fidelity Freedom Index. The T. Rowe Price Retirement 2050 Fund had a 7. 99% return in the quarter (ending 9/30/13), and for the year ending 9/30/13, the fund returned 19. 28%. The fund’s expense ratio was 0. 78% as of its fiscal year ending May 31, 2013. The 12 month low-high NAV was $10. 18 – $13. 02. One of the most consistent and top performing large-value selections is the T.
Rowe Price Equity Income fund. The fund has returned 4. 2% annually for the past 13 years. The fund has also finished in the top half of its category in 8 years between 2000-2010. Holdings include Bank of America, General Electric, and Chevron. Another consistent choice is the T. Rowe Price Dividend Growth fund, which has returned 2. 4% annually from 2000-2013. This fund focuses on steady companies with high returns on equity. Among the strongest performers is T. Rowe Price Small-Cap Value, which has returned 10% annually from 2000-2013.
Holdings include Stein Mart and Men’s Wearhouse. T Rowe Price’s website features a “Mutual Fund Gateway;” this interactive tool allows users to research hundreds of mutual funds objectively. Search options include by fund family or Morningstar category, and you are able to compare prospective funds by fund performance period, growth percentage, and Morningstar Rating. OTHER SERVICES T Rowe Price offers many convenient brokerage accounts that offer products such as stocks, ETFs, Bonds, CDs, mutual funds from other fund families, precious metals, options, and margin investing.
Account range from a traditional brokerage account that requires a minimum initial investment of $2500 to a premium “Brokerage Advantage” account, which has a minimum initial investment of $10,000. The Advantage account also comes with a secured line of credit, unlimited checkwriting, VISA Gold ATM and debit/check card. The company also offers the T. Rowe Price College Savings Plan. All earnings are not taxed, and all withdrawals for educational expenses are federal income tax-free. The contribution maximum is $400,000 per child, and anyone can contribute.
Clients have a choice of 13 professionally managed portfolios. INSIGHT ON THE MARKET In addition to the many retirement plans and products, T. Rowe Price offers its insight and experience about the financial industry. Views and analysis on recent market activity, as well as financial and investing trends are available right on the company’s corporate website. This is useful to anyone, whether they are a customer of T. Rowe Price’s or not. The T. Rowe Price Report is a quarterly newsletter contributed to by T. Rowe Price’s chief economist and investment managers.
Some of the top financial news and research outlets, such as Yahoo! Finance, use this report as a respected resource to offer perspectives and analysis on the economy and market sectors. The report also discloses the company’s performance and expenses for all of their funds, and includes graphs and charts to illustrate key points. The T. Rowe Price Investor® Magazine, which is also quarterly, allows investment experts to weigh in on retirement planning, personal finance strategies, and mutual fund investing. This magazine has won many awards, notably from The Communicator Awards and the APEX.
The magazine is offered as a free app in the iTunes store. COMPETITION Some of the T Rowe Price’s many competitors include The Vanguard Group, Inc. , Black Rock, Inc. , and Fidelity. T Rowe Price comparatively has some of the lowest expenses in the industry. Morningstar ranked T. Rowe Price #2 among 30 of the largest fund groups based on criteria such as five-year fund performance rankings and average portfolio manager tenure. 53 of its 111 funds have been rated by Morningstar as of September 2012; of these, 22 are rated Gold, 12 Silver, 10 Bronze, and 9 Neutral. No fund has received a Negative rating.
The highest-rated funds are largely run by longtime managers. An area of weakness for Price is international equity. 1 fund is rated Silver, 3 are rated Bronze, and 5 are rated Neutral. This is a testament to the fact that international-equity operation is probably the least established part of the organization. This may be due to inexperienced management or undistinguished processes. Investors may also shy away due to currency and political risk. T. Rowe Price is behind many of its competitors in this area. Up until 2000, T. Rowe Price could not sell its investment products on the international markets.
Through a joint venture with Robert Fleming, a UK based asset management firm, Price began to manage non-US stock and bonds for American investors. Since then, its growth in this market has been climbing. Hopefully, the company will continue to utilize their resources and strengthen this segment. In a report by No-Load Fund Investor newsletter, Vanguard, Fidelity, and T. Rowe Price were measured to see how they stacked up against other fund families. From 2005 to 2010, “the average Vanguard fund outdid 60% of competitors, while Fidelity surpassed 62%. The top prize went to T.
Rowe Price, which outperformed 72% of peers. ” This report was significant for Price, not only because the company outpaced its rivals (some who are larger) in small growth, mid-value, large blend and international, but because the company was able to use prudent risk management and excel during the recession. Some of Fidelity’s funds dropped because of holdings of other troubled financial companies, like AIG. In contrast, “T. Rowe Price New America Growth fell 38% and outpaced 67% of competitors. ” The fund focused more on growing companies with modest share prices, like Priceline. com. At the 2013 U.
S. Lipper Classification Fund Awards, T. Rowe Price received 12 individual best fund honors on ten of their funds, including the T. Rowe Price Financial Services Fund, T. Rowe Price Health Sciences Fund, and multiple target-date retirement funds. NEW REGULATION IMPACTS After the recession in 2008, there were many rules and regulations created and/or modified with the intent of preventing another disaster. These new reforms have impacted T Rowe Price in ways that demand more flexibility and innovation. In 2010, there were many changes made in the way the SEC oversees the investment management industry.
The SEC’s Division of Enforcement created a new Office of Market Intelligence; the purpose of this was to collect and study all tips and complaints received. The SEC’s Office of Compliance Inspections and Examinations redeveloped their risk assessment process and responsiveness to tips. The focus is on valuations, portfolio management, trading practices, and conflicts of interest. On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. As a result, a uniform standard of conduct was recommended for broker-dealers and investment advisers.
The act also created the FSOC and the CFPB, as well as required SEC registration for hedge fund and private equity fund managers. Many firms, T Rowe Price included, began to evaluate their compliance policies and procedures to ensure they fit with the current business practices. In May of 2013, T Rowe Price decided to sell the 13 year old T. Rowe Price Savings Bank, citing that “the small size of the bank relative to the overall company makes ownership unjustifiable given the potential impact of regulations related to the Dodd-Frank Wall Street Reform and Consumer Protection Act and other new rules.
” The bank was sold to private investor Jacob M. Safra. New regulations involving cost basis reporting to the IRS came out in 2010. These come directly from legislation that is part of the 2008 Emergency Economic Stabilization Act. The major change is that brokers and mutual fund companies are required to report cost basis information to investors and the IRS. This means T Rowe Price now tracks a customer’s cost basis, holding period, and sale proceeds of securities acquired on or after the effective dates. The new IRS regulations are applicable to taxable accounts only, so money market funds and tax-deferred accounts were not affected.
In other recent news, 5 of T Rowe Price’s funds received a big boost with the announcement of Twitter’s IPO. Price had picked up a combined 11. 9 million preferred while Twitter was still private. At the end of September, they were valued at about $280 million. After the close of the day on November 7 2013, the value shot up to $536. 2 million. Price had been investing in Twitter since 2009. CONCLUSION In a snapshot, T Rowe Price outperforms its competitors in many ways, and is dedicated to simplifying financial education for the community. The employees are the company’s biggest assets, and the social responsibility of the firm is admirable.
Investing does not need to be difficult, but it is necessary in order to live comfortably in retirement. Whatever method is chosen, the newest regulations that have been imposed to ensure that all investing is done ethically. T Rowe Price is committed to following the guidelines from the recent legislature, and continues to work hard for their clients. http://finance. yahoo. com/q/mh? s=TROW+Major+Holders http://markets. on. nytimes. com/research/stocks/news/press_release. asp? docTag=201310240729PR_NEWS_USPRX____PH03297&feedID=600&press_symbol=272216