July 2021 Newsletter to Clients

Enjoy this month’s edition that features a primer on mutual funds and a focus on one of our most widely held funds.

We talk often about stock market performance and investment returns but we talk less often about specific mutual funds and how they work. This month we’ll focus on one of the funds many of our clients are invested in, T. Rowe Price Blue Chip Growth Fund (TRBCX).

First, just what is a mutual fund? A mutual fund is an investment vehicle made up of a pool of money collected from many investors to invest in financial securities like stocks, bonds, and other assets. For instance, TRBCX buys shares of mainly large, U.S. companies using the money you and we invest in the mutual fund. So, when we buy a share of a mutual fund, we’re buying the collective performance of all the assets held by the fund.

Buying shares of a mutual fund rather than stocks of individual companies allows an investor to diversify their own portfolio at a relatively low price. A fund’s price is referred to as the Net Asset Value (NAV) of the fund and is derived by dividing the total value of all the securities held by the fund by the total amount of shares outstanding.

TRBCX is called the ticker symbol for the T. Rowe Price Blue Chip Growth mutual fund. The fund seeks to invest in industry-leading companies they believe are positioned for long-term growth. The approximately 135 to 145 companies the fund owns stock in are mainly categorized as large or medium-sized companies. TRBCX is what’s called an open-end fund so, when someone invests in the fund, TRBCX is obligated to buy more companies’ stock. This is different from buying one company’s stock where a buyer can only buy if there is a willing seller.

Holdings: The shareholders of TRBCX have invested over $98 Billion into the fund. Of that, over $90 Billion is invested in shares of U.S. companies with the remaining portion invested in stock of non-U.S. companies. The largest holdings include the companies Amazon, Alphabet, Facebook, Microsoft, Apple, Visa, and the Chinese company Tencent.

Purpose of the fund: Moneywatch uses TRBCX as a growth fund, meaning we expect this mutual fund to help drive the growth in clients’ portfolios. On your reports TRBCX is included in the Large-Cap category.

Performance: Mutual funds derive their returns from dividends paid by the individual company stocks they own and when the prices of the stocks they own increase. Mutual funds pay out almost all the income it receives in the form of distributions. TRBCX pays its distributions annually each December.

Over the last 10 years, TRBCX has earned an average annual return of 17.07% - that includes both dividends from the companies it owns and share price increases. The TRBCX benchmark – the S&P 500 – earned an average annual return over that same time period of 13.91%. Over the last three years TRBCX has earned an average annual return of 19.29% compared to 16.78% for the S&P 500. Over the past year TRBCX has earned 55.83% compared to 56.35% for the S&P 500. *The fund notes that returns over 40% are highly unusual and unlikely to be sustained.*

Please remember that past performance may not be indicative of future results.

Thank you for your continuing confidence.