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3 Small-Cap Mutual Funds Primed for Growth

Don't stick your neck out for individual names — harness the explosive potential of small caps via these funds

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T. Rowe Price Diversified Small-Cap Growth (PRDSX)

mutual-funds-t-rowe-PRDSXT. Rowe Price Diversified Small-Cap Growth (PRDSX) is simply not your average fund that uses a quantitative approach.

Manager Sudhir Nanda manages a fund that holds around 300 stocks and trades infrequently — turnover is just 15% annually. PRDSX also does not use a momentum-based strategy to pick holdings. Fundamental analysis is incorporated with quantitative (computer) models to determine the direction of the portfolio.

Currently, 22% of the fund is invested in technology names and 19% of the portfolio lies in the healthcare sector. Recent top holdings include 3D Systems (DDD), Boston Beer Co. (SAM), Incyte (INCY), Maximus (MMS) and Middleby (MIDD).

The results are working on this $709 million fund — PRDSX is up 39.2% YTD, which places the fund in the top 23% of mutual funds in its Morningstar category. And during the past five years, this T. Rowe Price fund has advanced at an annualized 25.6% clip, which places it in the top 11% of all small-growth funds.

Expenses run a reasonable 0.91%, or $91 for every $10,000 invested.

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