NEW YORK -- If there ever is another bear market in stocks, T. Rowe Price Associates Inc.'s mutual funds will be better prepared than they were the last time.

Price's equity funds flourished in the early 1970s when they were stuffed with America's fastest-growing -- and riskiest -- companies that were fueling a market rally.

Then, starting in 1973, high inflation rates and high interest rates sent stocks into a years-long funk, and Price's risky investments killed their funds' performance. T. Rowe Price Growth Stock Fund, for instance, slumped 25.2 percent in 1973 and 33 percent in 1974.

"We saw what can happen and we've learned how better to invest money," said David Testa, Price's chief investment officer, who joined the Baltimore-based firm in 1972. "We're more conscious today about the prices we pay for stocks, and we run more diversified portfolios."

While Price's funds, and those managed by Putnam Investments and Capital Group Cos.' American Funds, hold a wider mix of stocks to minimize risks, funds run by firms such as Denver-based Janus Capital Corp. make "big bets" on a smaller number of stocks, said Russel Kinnel, an analyst at Morningstar Inc., an industry research firm.

The average Janus fund has half its assets invested in 10 stocks, Kinnel said. By contrast, the average Price fund has about one-quarter of assets devoted to its top 10 stock holdings, helping make the company's funds among the least risky in the business, he said.

Janus' approach scored much higher returns for investors in 1998 than Price's. The average Janus U.S. stock fund surged 49.6 percent on an asset-weighted basis last year while the average Price domestic equity fund rose closer to 16.8 percent, according to Financial Research Corp., a Boston-based research firm.

"Last year was a more ordinary year for us," Testa said. That can be explained by the firm's reluctance to pack its funds with a few fast-growing companies. "Going into the 1973-1974 period, our funds had about a 50 percent higher concentration in the 20 biggest stocks then they do today," he said.

Take the Price Growth Stock Fund. It's a "watered-down growth" stock fund, according to Morningstar. The fund holds a bunch of stocks that aren't known for their above-average earnings growth. The list includes stocks such as Philip Morris Cos., Mobil Corp., Freddie Mac and Waste Management Inc.

Price Growth Stock Fund rose 27.4 percent last year, trailing the 28.6 percent gain of the Standard & Poor's 500 Index -- the benchmark against which most U.S. stock funds are judged.

Testa is bullish on Price. The market works in cycles, so concentrating assets in a particular subset of stocks only works for so long, he said.

Investors don't seem quite as optimistic as Testa, judging by the level of new investment in the company's funds.

Price's stock and bond funds took in about $3.5 billion last year, down from $9.1 billion in 1997, according to Financial Research. By contrast, Janus' funds took in $9 billion in 1998, up from $7.2 billion in 1997.

Officials from Janus didn't return calls to discuss market risks. "Although Janus doesn't manage any lemons, some of their funds have taken on a lot of risks," Morningstar's Kinnel said.

Janus' top-performing fund, the $19.5 billion Janus Twenty Fund, concentrates its assets in about 20 to 30 stocks, compared with the 75 to 100 stocks that most U.S. stock funds hold. It's a swing for the fences investing style that worked last year when Janus Twenty soared 73.4 percent.

Janus managers are known for doing "intensive research" before buying a stock, but Janus' funds "have more embedded price risk" than funds managed by firms such as Price, Kinnel said.

The stocks that Janus funds hold generally have higher price-to-earnings ratios than the broader market, Kinnel said. Some of the firm's biggest stock holdings are Microsoft Corp., America Online Inc., Cisco Systems Inc. and Amazon.com Inc.

Money managers are paying closer attention to the risks of their funds, especially after a 17-year market rally, Kinnel said.

Other firms, such as American Century Investments based in Kansas City, Mo., have broadened their menu to include more funds that invest in bonds and value stocks.