Allocation Balanced fund seekers should consider taking a look at T. Rowe Price Balanced Fund (RPBAX - Free Report) . RPBAX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
RPBAX is one of many Zacks' Allocation Balanced mutual funds to pick from. Allocation Balanced funds seek to invest in a balance of asset types, like stocks, bonds, and cash, though including precious metals or commodities is not unusual; these funds are mostly categorized by their respective asset allocation. Investors utilize Allocation Balanced funds as a way to get a good start with diversified mutual funds, as well as for core holdings in a portfolio of funds.
History of Fund/Manager
T. Rowe Price is based in Baltimore, MD, and is the manager of RPBAX. T. Rowe Price Balanced Fund made its debut in December of 1939, and since then, RPBAX has accumulated about $3.79 billion in assets, per the most up-to-date date available. The fund is currently managed by Charles M. Shriver who has been in charge of the fund since May of 2011.
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 8.57%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 6.9%, which places it in the top third during this time-frame.
When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. RPBAX's standard deviation over the past three years is 7.22% compared to the category average of 7.86%. The standard deviation of the fund over the past 5 years is 6.96% compared to the category average of 7.76%. This makes the fund less volatile than its peers over the past half-decade.
Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In the most recent bear market, RPBAX lost 37.76% and underperformed comparable funds by 1.58%. This could mean that the fund is a worse choice than comparable funds during a bear market.
Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. RPBAX has a 5-year beta of 0.66, which means it is likely to be less volatile than the market average. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. RPBAX has generated a negative alpha over the past five years of -0.21, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, RPBAX is a no load fund. It has an expense ratio of 0.57% compared to the category average of 0.90%. So, RPBAX is actually cheaper than its peers from a cost perspective.
Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $100.
Overall, T. Rowe Price Balanced Fund has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, T. Rowe Price Balanced Fund looks like a good potential choice for investors right now.
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