Risk-loving investors, who give precedence to capital appreciation over dividend payouts, may consider small-cap growth mutual funds for healthy returns. These funds focus on realizing an appreciable amount of capital growth by investing in stocks that are set to gain 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 with market cap less than $2 billion.
The companies, smaller in size, offer growth potential and their market capitalization may increase subsequently. Also, due to their limited international exposure, small-cap funds offer higher protection than their large and mid-cap counterparts during economic downturns.
Below we share with you three top-ranked, small-cap growth mutual funds. Each has a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform peers in the future.
Best Small-Cap Growth Mutual Funds for Stronger Gains: BlackRock Small Cap Growth Fund (CSGEX)
BlackRock Small Cap Growth Fund (MUTF:CSGEX) invests a major portion of its assets in equity securities of small-cap domestic companies. According to CSGEX advisors, companies with market cap similar to those included on the Russell 2000 index are considered small-cap firms.
The fund may also participate in IPO markets. BlackRock Small Cap Growth Equity Investor A has returned 11.8% in the past year.
Travis Cooke is one of the fund managers of CSGEX since 2013.
Best Small-Cap Growth Mutual Funds for Stronger Gains: MassMutual Select Small Cap Growth Equity Fund (MSGZX)
MassMutual Select Small Cap Growth Equity Fund (MUTF:MSGZX) seeks appreciation of capital for the long run. MSGZX invests primarily in common stocks and equity securities of small-cap companies that are included on the S&P SmallCap 600 index or the Russell 2000 index.
The fund may also invest around one-fifth of its assets in foreign companies, including those based in emerging markets. MassMutual Select Small Cap Growth Equity has returned 18.4% in the past year.
MSGZX has an expense ratio of 0.86% compared with the category average of 1.08%.
Best Small-Cap Growth Mutual Funds for Stronger Gains: Hartford Small Company HLS Fund (HDMBX)
Hartford Small Company HLS Fund (MUTF:HDMBX) invests in common stocks of companies that have strong capital growth potential.
HDMBX’s sub-adviser, Wellington Management Company, LLP, invests a large chunk of its assets in common stocks of companies that fall within the range of both the S&P SmallCap 600 and Russell 2000 indices. The fund seeks capital growth. Hartford Small Company HLS has returned 18.9% over the past year.
As of March 2018, HDMBX held 224 issues, with 3.03% of its assets invested in Planet Fitness Inc A.
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