Dear Mr. Berko: 
I have three teenage grandchildren and want to invest $12,500 for each of them. I asked my broker for his recommendation, and he gave me four suggestions. Purchase a $12,500 variable annuity for each grandchild. Invest in a portfolio of various exchange-traded funds for each. Or I can be more aggressive and purchase several publicly traded hedge funds that have recently opened to the public. Or invest $12,500 in an annuity for one grandchild, $12,500 in an ETF for another grandchild and $12,500 in a hedge fund for the third grandchild. He was very patient with me and took his time to explain each investment alternative. Please tell me which alternative you think would be best. 

S.L., Kankakee, Ill.

Dear S.L.: 
If you love those grandkids, the best alternative is to consider another broker, because this guy needs a financial lobotomy.

I think that this broker is well-trained, that he understands the products he sells, that he’s probably a nice guy, that he’s concerned about your opinion of him and that he wants his investment recommendations to do well for you. However, this mediocre broker is also an articulate incompetent, employed by a major ding-a-ling brokerage that programs its salesmen to provide clients with average advice. This industry is chock-full of adequately trained yet mediocre brokers. And most of the poor schnooks who have a few dollars to invest will have the same cookie-cutter portfolios. They will have similar variable annuities, similar exchange-traded funds and similar publicly traded hedge funds -- few of which will produce good returns but each of which will earn mediocre brokers sweet commissions. Toast this guy with a bierstiefel of glogg and tell him, “Sayonara, Clyde.”

I advise you to ring T. Rowe Price, open an account for each grandchild with $12,500 and invest $2,500 in each of the following five no-load mutual funds:

T. Rowe Price New Horizons Fund (PRNHX-$46.09) is a $13.3 billion five-star fund that invests primarily in small emerging companies in their early corporate life cycle. PRNHX’s one-, three-, five- and 10-year returns are 35.4 percent, 26.3 percent, 15.7 percent and 12.6 percent, respectively.

T. Rowe Price Small-Cap Stock Fund (OTCFX-$43.49) is a $9.2 billion five-star fund investing in small-company value stocks that have superior growth. OTCFX’s one-, three-, five- and 10-year returns are 32.3 percent, 21.3 percent, 14.1 percent and 11.2 percent, respectively.

T. Rowe Price Media & Telecommunications Fund (PRMTX-$68.56) is a $2.7 billion five-star fund investing in the common stocks of companies engaged in the Internet, publishing, cable/satellite TV and phone service industries. Its one-, three-, five- and 10-year returns are 26.2 percent, 20.7 percent, 15.1 percent and 16.9 percent.

T. Rowe Price Health Sciences Fund (PRHSX-$58.23) is a $7 billion five-star fund that invests in companies involved in the research, development, production and distribution of products or services related to the health care industry. PRHSX’s one-, three-, five- and 10-year returns are 39.1 percent, 32.5 percent, 17.1 percent and 14.4 percent.

And finally, T. Rowe Price Diversified Small-Cap Growth Fund (PRDSX-$23.31) is a four-star, $601 million growth fund investing in companies that are listed in the MSCI U.S. small-cap growth index. The fund’s one-, three-, five- and 10-year returns are 34.7 percent, 22.7 percent, 12.6 percent and 10.4 percent, respectively.

Most professionals agree that investing an equal dollar amount in emerging growth, small-company value/growth, media and telecommunications, health science, and small-capitalization growth stocks is an aggressive investment posture. But because these are long-term investments to be managed by T. Rowe Price, many professionals would agree this selection of funds is much likelier to outperform the selections your broker suggested. And the commission costs are certainly a lot more agreeable.

Just dial T. Rowe Price’s toll-free number and speak to a representative. She/he will either email you the account papers or post them by U.S. mail. T. Rowe Price, founded by Tom Price Jr. in 1937, manages more than $635 billion and runs more than 70 no-load, low-cost mutual funds. Sadly, I don’t own any of them.