Once you have built a core portfolio that adequately diversifies your holdings across the broad market, it’s time to begin thinking about accenting your portfolio with some specialty funds. While specialty funds shouldn’t make up a large portion of your portfolio, they can certainly help your returns if you find favorable industries/sectors to invest in.
That is why I wanted to highlight the T. Rowe Price Media & Telecom fund (PRMTX). As the name of the fund suggests, it primarily invests in companies in the media and telecom industries. The fund typically seeks media/telecom holdings of around 80% of total holdings, with a focus on large- to mid-cap companies.
- Manager and Tenure: Henry Ellenbogen (2.5 years)
- Min. Initial Investment: $2,500 / IRA $1,000
- Front-Load: None
- 12(b)-1 Fee: None
- Expense Ratio: 0.87%
- Assets: $2.275 billion
- Median Market Cap:$13.6 billion
- Turnover: 55%
- Yield: None
The performance speaks for itself when looking at the following chart. It is consistently beating its category benchmark, and clearly outperforms the S&P 500 by a large margin. Of course, this isn’t out of the ordinary for a fund that focuses on such a small segment of the market, so a comparison to the broad market isn’t fair. Even so, the margin it regularly beats its peers is enough to grant this fund a top five rank in the category for the past 1, 3 and 10 year averages.
So, how has this fund managed to perform so well? According to Morningstar:
Ellenbogen seeks to buy communications- and media-related companies positioned to benefit from secular trends. He looks for firms trading at discounts to comparable industry peers, but he will pay more for those he thinks are dominant. Ellenbogen will follow in previous manager Rob Gensler’s footsteps by maintaining subsector diversification and looking abroad for opportunities.
- No front load
- Relatively low expenses
- Morningstar 5-star rating
- Superior returns in category
- Relatively new management
- Volatile sector
- Somewhat high minimum investment
The Bottom Line
Past performance is no guarantee of future performance, so just because this fund has been on a tear in recent years, that doesn’t mean it will continue. Even so, if you are bullish on the media and telecom sectors, this is one of the top funds in the category. Keep in mind the $2,500/$1,000 minimum investment amounts, because if the minimum investment is more than 5-10% of your total portfolio, you would be taking on more risk that necessary. Otherwise, with this fund offering from T. Rowe Price, it is very affordable and clearly a solid performer if it meets your investment objectives.
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About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.