Small-cap mutual funds are the best of both worlds for many 401(k) and IRA investors. There is the stability and diversification of a broad investment like a mutual fund, but the potential for serious profits as these small companies grow exponentially. Large-cap mutual funds are great to protect your nest egg, but if you really want to get aggressive about growing your retirement savings then small-cap funds are the way to go.
There is risk, of course. When the stock market booms then small-cap stocks soar faster — but when markets crash, these companies have less of a cushion to fall back on and can really feel the pain. If you want stability and diversification, you should make sure your portfolio consists of larger companies and some income investments too, just to avoid putting all your eggs in one basked.
However, if you’re aggressive and willing to take the risk, here are five top funds identified by advisory firm Zacks.com. Each has earned a Zacks #1 Rank (Strong Buy), which according to the firm means “we expect these mutual funds to outperform their peers in the future.”
- Federated MDT Small Cap Growth A (MUTF:QASGX)
- AllianceBernstein Small Cap Growth A (NASDAQ:QUASX)
- Homestead Small Company Stock (NASDAQ:HSCSX)
- Virtus Small-Cap Sustainable Growth A (NASDAQ:PSGAX)
- BlackRock Liquidity TempFund Instl. DWS Small Cap Growth A (NASDAQ:SSDAX)
Investors can click here to see the complete list of funds ranked by Zacks.