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T Rowe Price versus Vanguard April 13, 2007

Posted by pf in Expenses and Savings, Portfolio Allocation.
Tags: , , , , , , , , ,

In my monthly net worth update for March, I had mentioned that I wanted to do some research on Vanguard to see if they might be a better “home” for my portfolio. Mainly, my interest was whether or not the lower expenses translated into better overall returns.

I must admit, I was not looking forward to this. The main reason is that I thought it would be very time consuming (I am a bit lazy). Also, (you aren’t going to believe this) I had this uneasy feeling that I would indeed find that it made more sense and would have to go through a whole process of switching my assets out of T Rowe Price to Vanguard. Isn’t that ridiculous?

So, why the “uneasy feeling”? Essentially, I have been investing with T Rowe Price for some years now and have become very familiar with their mutual fund products, tools, etc. Essentially, my unease was due to the fact I would have to spend time “learning the ropes” at Vanguard and leave my “comfort zone” at T Rowe Price. Yes, I realize this is silly. I suspect it has similar origins to why people don’t easily change their phone (not cell) or insurance company…you just don’t feel like messing with it. Also, of course, the inertia or lazy factor is ever present. Anyway, I overcame my irrational behavior and lazy tendencies and did it.

Generally speaking, after having gone through my earlier asset allocation exercise, I am currently happy with the composition and allocation of my existing portfolio. Therefore, my first challenge was to find fund at Vanguard that were similar to my existing ones at T Rowe Price.

Initially, I started by using some of the premium mutual fund screeners at Morningstar to identify funds with a rating of 4 stars or more. I then plucked all of the Vanguard funds out of there and started looking at them to see what names seemed to have some relation to the funds I have. For example, one fund I have is small-cap value. Vanguard has a fund called small-cap value index – Ta Da! A match. As you can imagine, I ended up with a huge pile of funds and was still unsure whether they were all matches or not. I started thinking to myself that there must be a better way to do this, so I called Vanguard.

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When I spoke to the Vanguard representative, I quickly got this sense he wasn’t too interested in talking with anyone today (you know what I’m talking about, don’t you?). Anyway, I told him I was a potential investor and wanted to find similar funds at Vanguard to what I already had. For the most part, his initial response was “I don’t know anything about T Rowe Price” and couldn’t help me. After some prodding, he asked me to tell him what kind of fund I had and he would look for potential matches. After about 10 minutes, I had another list of funds…some the same as my original list, plus some new ones.

Despite going through 2 rounds of this, I still felt like the process wasn’t a very good one. So, I began trolling the Vanguard website and finally found a tool that does exactly what I’m looking for, which is to Find similar Vanguard Funds. Granted, I probably could have found this earlier on my own, but I am a bit annoyed the Vanguard representative did not direct me to it. I don’t want to paint my recent Vanguard experience with a broad brush, but my first impression was not favorable and I kept thinking to myself it must be one of the downsides of having super low expenses. Again, this is probably not the case, but you know what they say about first impressions.

Now, armed and dangerous with my newly found tool, I start to plug in my various T Rowe Price funds and it spits out Vanguard alternatives…now we’re getting somewhere. My next step was to figure out what my criteria would be for comparision.

While I’m sure someone more savvy then I could think of multiple ways to make comparisons of the various funds, I chose to take a simple, straightforward approach. Essentially, I wanted to know what were the differences in expenses and total returns. As far as returns were concerned, I wanted to look at not just a year’s worth, but decided upon the most recent 5 years window. Why this time-frame? I wanted to get a “current” sense for how the fund has fared while still making sure I gave myself enough of a time horizon to smooth out any outliers (exceptionally high / low years). I also looked at the 10 year and since inception although I didn’t include it in my results (didn’t feel like looking it up / typing it all). Generally speaking, however, I don’t recall any wild swings in the results.

So, here is the summary of my findings:

Fund Name Symbol Expense % 5-Yr Return Return Diff.
T Rowe Price Capital Appreciation PRWCX .76% 11.48%
Vanguard Star Fund VGSTX .35% 8.73% 2.75%
Vanguard Asset Allocation VAAPX .41% 8.54% 2.94%
Vanguard Balanced Index Fund VBINX .20% 7.23% 4.25%
Vanguard Wellington VWELX .30% 8.97% 2.51%
Vanguard LifeStrategy Moderate Growth VSMGX .26% 8.49% 2.99%
Vanguard LifeStrategy Growth VASGX .27% 9.59% 1.89%

T Rowe Price Emerging Markets Stock PRMSX 1.25% 25.86%
Vanguard Emerging Markets Index VEIEX .42% 24.89% .97%

T Rowe Price Equity Income PRFDX .71% 9.35%
Vanguard Windsor VWNDX .36% 9.42% -.07%
Vanguard Windsor II VWNFX .34% 10.34% -.99%
Vanguard Equity Income VEIPX .31% 8.75% .60%
Vanguard US Value VUVLX .39% 8.23% 1.12%
Vanguard Value Index VIVAX .21% 10.37% -1.02%

T Rowe Price Emerging Markets Bond PREMX 1.03% 14.17%
Vanguard None Available n/a n/a n/a n/a

T Rowe Price Growth Stock PRGFX .72% 7.74%
Vanguard Growth Equity VGEQX .91% 5.29% 2.45%
Vanguard Growth Index VIGRX .22% 5.08% 2.66%
Vanguard Morgan Growth VMRGX .42% 8.26% -.52%
Vanguard Primecap VPMCX .46% 9.53% -1.79%
Vanguard US Growth VMUSX .58% n/a n/a

T Rowe Price High Yield PRHYX .77% 9.90%
Vanguard High Yield Corporate VWEHX .26% 7.67% 2.23%

T Rowe Price Mid-Cap Value TRMCX .82% 13.99%
Vanguard Capital Value VCVLX .61% 10.49% 3.50%
Vanguard Value Index VMVIX .26% n/a n/a
Vanguard Selected Value VASVX .45% 12.63% 1.36%

T Rowe Price Small-Cap Value PRSVX .84% 14.55%
Vanguard Value Index VISVX .23% 10.78% 3.77%
Vanguard Strategic Equity VSEQX .40% 13.93% .62%

T Rowe Price International Equity Index PIEQX .50% 16.49%
Vanguard Developed Markets VDMIX .27% 16.92% -.43%
Vanguard All World VFWIX .40% n/a 16.49%
Vanguard Total International Index VGTSX .32% 17.79% -1.30%

Anywhere you see a difference with a positive result means that the T Rowe Price fund beat the Vanguard fund on the 5-Year Return. Those results that are negative and highlighted in orange are instances where the Vanguard fund won out.

Amazingly, the T Rowe Price funds fared better than I thought. Although they clearly have higher expense ratios, I feel that is was often rewarded with superior returns. Clearly, I could do better with US investments in Growth and Value stocks versus my current offerings. Upon closer inspection of the International Equity Index, I discovered that the Total International Index is probably not a good one for comparison as it invests in both US and Europe / Asia stocks (which probably explains why they call it “Total”). My current fund is heavily geared toward Western Europe (no US stocks). Nontheless, that Vanguard fund seems to be a good one.

Based upon my so called analysis, I don’t really feel the evidence compels me to switch from T Rowe Price to Vanguard. Although I’m probably a bit biased and not terribly unhappy with that result, I hope I have been fair in my assessment and it makes sense. I would LOVE for any diehard Vanguard types out there to challenge my approach and / or offer any suggestions where I may have not considered something, etc that may change the results.



1. jh - April 21, 2007

I’m a vanguard diehard and have been using them for about 6 years. I’m 30 and wasn’t able to invest until a few years ago.

Vanguard is the company that pioneered index funds, a concept I think is fantastic. That’s what originally drew me to them and I have been very happy with them and will probably use vanguard for the rest of my life.

I have my roth ira, non-retirement investments, and my emergency fund with them.

Roth IRA is a target retirement 2040 fund, non-retirement is tax-managed balanced fund and emergency is prime money market fund.

If only my 401k used vanguard I’d be in heaven. 😉

2. pf - April 23, 2007

jh – just what I was looking for – a vanguard diehard! What I would really be interested in is whether or not you think my analysis is flawed and there is compelling reason I should re-consider Vanguard? Based upon my analysis, it seems that staying with T Rowe Price is the best course?

3. TFB - April 23, 2007


Your question seems simple, basically “Am I better off with T. Rowe Price funds?” but it’s actually quite complex and requires a long answer. I’ll put my thoughts together in a new post on my blog later this week. You will probably not like the answer but I hope it will be at least helpful for your analysis.

4. pf - April 24, 2007

On the contrary! I very much look forward to it! Thanks for taking an interest. I’ll definitely be on the lookout.

5. DC - May 2, 2007

I thought I’d put my 2 sense in. So check it out, I have a roth IRA under Vanguard–target retirement fund. However, I just couldn’t get away from TRP’s capital appreciation fund, so I am invested in that. TRP has a mid-cap value fund that is currently closed to new investors. It’s a hell of a fund, and I would love to get in but I cant. However, Vanguard just initiated a mid-cap value index fund less than a year ago, and its trading at about $24. What do you think? Do you think it has the potential to do as good as TRPs Mid Cap Value fund that’s currently closed?

6. pf - May 3, 2007

I’m also a fan of TRP’s Capital Appreciation fund (PRWCX) and have recently upped my allocation there to 30% as a hedge against an expected market drop this summer (my post entitled “Sell Stock in May…”. The mid-cap value fund (TRMCX) has performed really well although sometimes I worry it might be getting a bit expensive.

I honestly have no idea whether or not the Vanguard fund will do as well. However, if the asset class continues to perform well, I’m sure the Vanguard fund will do nicely for you. Although TRMCX is closed, one way you could get in on it is if you had a rollover into TRP. They will allow you to invest in closed funds with a rollover.

7. Sheila - February 17, 2008

I’m already in T.Rowe Price and this was very useful for and reassuring to me – thank you so much for going to all this trouble. I thought T. Rowe price had a rep for low expenses (I still have an account w/Fidelity that charges more in fees and doesn’t perform nearly as well), and your analysis helped solidify my decision to stick with TRP now that I’ve finalllllly decided to open up a Roth. Good look in your quest!

8. pf - February 21, 2008

Glad it was useful for ya Sheila! Thanks!

9. csodonnell - March 2, 2008

Does T Rowe Price offer even better expense ratios – as your total portfolio amount invested with them goes up – like Vanguard?

10. pf - March 3, 2008

As I recall, I don’t think TRP reduces expense ratios as your portfolio increases. Rather, based upon the amount of funds invested, you get some additional services, etc. They have 3 tiers:

Preferred Services ($100K invested)
Personal Services ($250K invested)
Enhanced Personal Serves ($1M invested)

I’m currently eligible for Preferred (but a nice market upswing could put me into Personal). Additional benefits of this status include:
– Priority access (different cust svc number)
– First notice of products and services
– Free premium subscription to Morningstar.com
– Some fees waived, such as small account, etc

I’ve included a link to their website below which outlines each of the services in more detail:


11. George - May 27, 2008

I’m a big fan of T Rowe Price — primarily because:

A) a beginning investor can start with just $50 per month,

B) they have outstanding investment advisors. I’ve had several 1+ hour conversations with their advisors and I’ve always thought that they listened to my concerns and offered me good advice.

TRP doesn’t have anything to match VGTSX but their capital appreciation fund (PRWCX) totally whales on the Vanguard value index (VIVAX). TRP isn’t the right choice for indexing but for investors who are just starting out, they’re incredibly user-friendly and offer some outstanding investment options. Did I mention their customer service is incredible? They answer the phones 7 days a week!

TRP isn’t right for everyone but they’re definitely a great choice for most people.

12. P. T. - July 30, 2008

I have accounts with both Vanguard and T. Rowe Price. I like low cost funds. I like indexing, but am not opposed to managed funds either. I went with T. Rowe Price because they were among the first to offer a Roth Solo 401(K) plan and for free. Vanguard still does not offer one directly (though maybe possibly later this year).

Generally, I find T. Rowe Price has much better customer service, is more willing to put new products out like the Solo 401(K) and more focused funds like international, and seems more responsive to customer feedback in general. T. Rowe Price seems more eager to attract new customers as their fund minimums are much lower and their Preferred Services offer more at much lower money thresholds than Vanguard. Vanguard seems pretty ho-hum to investors that don’t have big bucks.

As far as their managed funds go, their expenses are not as low as Vanguard but they still in the best tiers of the expense realm in the grand scheme of things. As your numbers show, they have been competitive overall. If T. Rowe Price can keep their expenses under control and pass on the savings, they will hopefully continue to be competitive.

From a Diehard perspective, moving past the ‘costs matter’ mantra which we just went over, the other thing to worry about is future performance. Just because the funds have done well in the past doesn’t mean anything about the future. Manager changes can drastically affect the funds. Compared with other funds/institutions, T. Rowe Price seems to rely less on star managers and utilizes shared internal analysis. So there seems to be a group-think relationship between their funds. That does mean if their internal analysis is wrong or goes through restructuring, it could affect all their funds at the same time. Indexing avoids this problem.

Another Diehard-ism, don’t chase performance. This will probably kill performance more than anything. Buy and hold is the way to go, regardless of whether you are Vanguard or T. Rowe Price. Pick a fund that meets a specific need in your portfolio. Don’t swap T. Rowe Price funds because one is doing better than another.

This leads also into selection bias. Of the funds that you compared, were these all you were actually in, or did you just find T. Rowe Prices’s best? If you had done this for real, would you happen to pick T. Rowe Prices’s best funds or end up in some of their worst?

Ultimately, deciding to switch will have to weigh in different factors. If there is a year or two where T. Rowe Price gets beaten by the indexes, what will you do? Will you care? Does good customer service matter to you? Do you get (or will you get) and enjoy the perks of Preferred Services and how much is that worth to you?

13. P. T. - July 30, 2008

One more thing I forgot. In your comparison, you did not consider taxes in the overall returns. If any of your investments are in taxable accounts, tax inefficient funds will eat away at your gains. Index funds are generally tax efficient. Managed funds tend to be be less tax efficient, though some managers are very good at tax efficiency.

14. Veronica - February 13, 2011

Uau, this was the best place and opinions I’ve got. I’ve just decided to open a roth ira and thought that all the decision I needed to take would be what company but obviously not. That’s just the tip of the iceberg and all of you have helped a lot. Thank you all very much I now know at least what I have to look for.

Ellen Cotts - September 30, 2011

When evaulating any fund I strongly consider the risk measures shown by Morningstar. Being already retired, I am risk averse although to keep our investments growing we must accept some level of risk. In an up market one fund may look terrific but if they go down a lot in a down market then you would have been better off with the fund that went up a little less but held value in bad a bad market swing.

I also look at the length of tenure of the manager – a fair predictor of future results.

BTW, I invest in both Vanguard and TRP. They are both excellent but I believe in many kinds of diversification including among investment companies. Good luck with your investing.

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27. Mark Jacops - February 25, 2014

Just about 8 months ago I rolled over 25% of my portfolio from Vanguard to T Rowe Price.My decision was based upon several factors but the main one was:should my wife survive me, I think T Rowe Price would undoubtedly give her superior advice and help.
BTW I have been with T Rowe Price since 1997 and found them exceptionally helpful in their advice even though at times I thought they were too conservative– something I later came to regret not to follow.
I did weigh in the difference between Index funds (a Vanguard specialty) versus managed funds and after reading a lot about this subject,I came to the conclusion that a well managed fund,such as T Rowe Price’s capital appreciation,is really worth having.I went into this fund shortly after the “dot com” bust and it was the only stock fund that did not lose $$$ in 2000 or 2001.
In conclusion I am very happy with T Rowe Price because of their excellent advice and their integrity.I have only one request that so far I have not been able to get:what is the total amount of fees I have paid
for example in 2013—-I am told it is too difficult to figure out.Is it really or does T Rowe Price not want me to know?
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