MUTUAL FUND SPOTLIGHT
A Blended Portfolio for
Income and Growth
The T. Rowe Price Personal Strategy Income Fund (PRSIX) diversifies globally among a variety of stocks and bonds, with the objective of generating income first and capital growth second.
The fund is designed to serve as a core holding for conservative investors—or for those nearing or already in retirement. The blended portfolio typically allocates roughly 40% to stocks, 40% to bonds, and 20% to money market securities, although those percentages may change as the fund's management team responds to events in the financial markets and around the world. The fund currently invests in 11 market sectors, from large-cap and small-cap stocks to U.S. investment-grade and high yield bonds, as well as developed and emerging markets stocks and bonds outside the U.S. The fund's asset allocation is shown in the chart below.
A seasoned investment perspective
Charles Shriver, who joined the firm in 1991, took over as portfolio manager of the fund in October 2011. Shriver is a member of the T. Rowe Price Asset Allocation Committee of 11 senior investment managers from across the firm who help guide the Personal Strategy Income Fund's investment approach. "Our team has an average of 25 years of investment experience—which provides a broad and seasoned investment perspective," Shriver says. "When we meet, we make measured moves that look out over the next six to 18 months. We take a patient approach to investing."
Shriver recently favored stocks over bonds due to their solid equity valuations and positive earnings growth, and low yields available on fixed income securities. As of June 30, the fund's top stock holdings included shares of technology firms, retailers, and a global financial services firm. Within the fund's fixed income allocation, Shriver emphasizes emerging markets bonds over U.S. investment-grade bonds to capitalize on the diversification and growth potential offered by the developing world. "We see higher growth expectations and lower debt in many emerging economies than in the U.S.," he says. "We have also seen an evolution in the ratings profile within emerging markets bonds, which have become increasingly rated investment-grade."
Shriver recently added a diversifying allocation to real assets equities through companies that own or operate businesses related to assets with physical properties such as gold, oil, and real estate, with the goal of improving the fund's risk and return profile in periods of high or rising inflation. Of course, diversification cannot assure a profit or protect against loss in a declining market.
The fund's diversified approach to investing across a range of sectors in global stock and bond markets has contributed to strong long-term performance. The T. Rowe Price Personal Strategy Income Fund has outperformed its Lipper benchmark over the 3-, 5-, and 10-year periods ended June 30, 2012. Of course, past performance cannot guarantee future results.
By rebalancing into sectors that have been sold off or are undervalued, and trimming sectors that are overvalued, the fund offers a consistent approach to managing market volatility. "Over the long term," Shriver says, "we're able to draw on a tremendous amount of expertise and perspective from analysts and portfolio managers around the globe and across asset classes. We benefit from their collective experience and insights as we manage the fund."
Fund performance for the 1-, 3-, 5-, and 10-year periods ended 6/30/12 was 2.17%, 10.78%, 3.93%, and 6.52% versus 2.95%, 9.50%, 3.26%, and 4.88%, respectively, for the Lipper Mixed-Asset Target Allocation Conservative Funds Average.
Current performance may be higher or lower than quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. For the T. Rowe Price Personal Strategy Income Fund's (PRSIX) most recent month-end performance and up-to-date standardized returns, please click here.
The fund's expense ratio as of its fiscal year ended 5/31/11 was 0.77%.
Average annual total return figures include changes in principal value, reinvested dividends, and capital gains distributions. Source for Lipper data: Lipper Inc.