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THE VANGUARD GROUP, Valley Forge, Pennsylvania; 800-433-5514. The long-standing No. 2 of the mutual-fund business and the leading practitioner of no-load investing, Vanguard is led by iconoclastic John Bogle. It is the Wal-Mart of mutual funds, dedicated to winning customers by driving costs lower and lower. Because of that strategy, Vanguard has grown like, well, Wal-Mart. The annual cost of keeping your money at Vanguard is 31' per $100 invested, vs. an average $1.11 for the industry overall. When it comes to money-market and bond funds, where every penny counts, Vanguard is a great choice. It also specializes in inexpensive index funds--which is like buying a whole market. Vanguard's Index Trust 500 Portfolio, which mirrors the S&P 500, beats up on most other mutual funds year after year. The rap on Vanguard is that when it comes to picking aggressive equity funds, its crew lags behind Fidelity's. But there are major exceptions, such as Vanguard's top-performing Specialty Health Care Fund.
AMERICAN FUNDS, Los Angeles; 800-421-0180. This is the quiet power of the fund business. The Los Angeles-based company--managed by parent company Capital Research & Management, the nation's third largest fund group--neither attracts attention nor seeks it. Cap Re is one of those rare enterprises that succeed through groupthink. All its funds are managed by half a dozen or so managers along with dozens of research analysts. The results are notable in overseas investing, as with its EuroPacific Fund. Downside: its stock funds carry 5.75% loads and its bond funds, 4.75%.
T. ROWE PRICE, Baltimore; 800-638-5660. This company resembles its hometown Baltimore Orioles: it always seems to field a good team. T. Rowe features a well-balanced lineup of all no-load bond, international and small-stock funds. Unfortunately T. Rowe recently lost some of its luster in the small-stock arena after it closed Small Cap Value and longtime stalwart New Horizons this year. Why? Too much money was flowing in, making the funds cumbersome to manage. Its OTC Fund, however, which also invests in small stocks, is still open for business.
PUTNAM INVESTMENTS, Boston; 800-225-1581. The recent performance of this venerable company, which runs more than 90 funds, is anything but staid. Putnam owes its success in part to its rigorous research and its collaboration between analysts and groups of managers. Its equity funds, such as the high-flying New Opportunities Fund, are among the best performing funds overall in the business.
MERRILL LYNCH, New York; 800-637-3863. Yes, the big bull sells mutual funds as well as stocks--118 proprietary funds, including closed-end and offshore. Of course, the old caveat applies: you buy from a broker, you pay a broker a commission--or, since it's a fund, a load.
CHARLES SCHWAB, San Francisco; 800-435-4000. While Schwab offers 26 of its own stock, bond and money-market funds, it also sells hundreds and hundreds of other companies' mutual funds through its ONESource Service, which offers no-load funds with no transaction fees. Schwab's Mutual Fund Marketplace sells load and no-load funds with transaction fees. Look for Schwab to become an increasingly potent force in the mutual-fund business.