Risk-loving investors, who give precedence to capital appreciation over dividend payouts, may consider small-cap growth mutual funds to derive healthy returns. These funds focus on realizing an appreciable amount of capital growth by investing in stocks that are projected to rise in value over the long term.
Meanwhile, small-cap funds are good choices for investors seeking diversification across different sectors and companies. Small-cap funds generally invest in companies having market cap lower than $2 billion. The companies, smaller in size, offer growth potential and their market capitalization may increase subsequently. Also, due to their less international exposure, small-cap funds offer higher protection than their large and mid-cap counterparts in any global downturn.
Below we share with you three top-ranked, small-cap growth mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of small-cap growth funds.
T. Rowe Price QM U.S. Small-Cap Growth Equity (MUTF:PRDSX) seeks capital appreciation over the long run. PRDSX invests the lion’s share of its assets in securities of growth-oriented companies with small size market capitalization. Though PRDSX primarily focuses on acquiring securities of domestic companies, it may also invest not more than 10% of its assets in securities of companies located in foreign lands. T. Rowe Price QM US Small-Cap Growth Equity has three-year annualized returns of 8.9%.
As of June 2017, PRDSX held 304 issues, with 0.94% of its assets invested in Toro Co.
Oppenheimer Discovery Fund Class Y (MUTF:ODIYX) invests the bulk of its assets in common stocks of domestic companies, which have favourable growth prospects. The fund invests in small-cap companies which are within the range of the market cap of the Russell 2000 Growth Index. Oppenheimer Discovery Fund Class Y has three-year annualized returns of 8.4%.
ODIYX has an expense ratio of 0.87% compared with the category average of 1.26%.
Hartford Small Cap Growth HLS IB (MUTF:HBSGX) invests a major portion of its assets in common stocks of small-cap companies. HBSGX looks for companies that are expected to have above-average growth prospects. The fund may also invest a maximum of 25% of its assets in non-U.S. securities. Hartford Small Cap Growth HLS IB has three-year annualized returns of 8.4%.
David Elliot is one of the fund managers of HBSGX since 2010.
To view the Zacks Rank and past performance of all small-cap growth mutual funds, investors can click here to see the complete list of small-cap growth funds.
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