They've won loyal followings by offering broad collections of reliable funds -- not always delivering top returns, but rarely finishing at the bottom of the standings. Just as important, the companies all boast squeaky-clean images, since they have avoided the scandals and blowups that have plagued other fund families.
Which of the three has the best record? To find out, The No-Load Fund Investor newsletter calculated the average returns for each company over various periods. All three companies posted decent results. During the past five years, 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.
T. Rowe Price's performance was particularly impressive because the company outpaced its larger rivals in a variety of categories, including small growth, midvalue, large blend and international. The victory may be due to intense risk-control efforts. T. Rowe Price portfolio managers have long avoided swinging for the fences and helped the company excel during the downturn.In 2008, some Fidelity funds lagged because they overweighted financial stocks. Fidelity Magellan (FMAGX) owned American International Group (AIG) and other troubled financial companies, helping the fund lose 49% of its value for the year and lag 95% of large-growth competitors, according to Morningstar. In contrast, T. Rowe Price New America Growth (PRWAX) fell 38% and outpaced 67% of competitors. The T. Rowe Price fund limited losses by focusing on growing companies with modest share prices. A winning holding was Priceline.com (PCLN), a travel-booking company that gained market share. Vanguard was pulled down by the poor showing of its quantitative funds. Vanguard Strategic Equity (VSEQX) dropped 42% in 2008 and trailed 67% of its midblend competitors. The fund had big stakes in troubled financial companies, including First Marblehead (FMD), which securitizes student loans.
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