Investors aiming to reap substantial profits in the short run often turn to small cap funds. Though comparatively riskier than other fund categories, these funds have the ability to deliver appreciably higher returns due to two principal reasons. Firstly, they generate high sales volumes in a rising market, leading to a spike in their prices. In addition, research has shown that smaller firms reinvest their profits back into their business. This often reassures shareholders of better performance over the long term.
Below we will share with you 5 top rated small-cap funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect the fund to outperform its peers in the future. To view the Zacks Rank and past performance of all small-cap funds, then click here.
JPMorgan Dynamic Small Cap Growth A (VSCOX) seeks long-term capital appreciation. It invests at least 80% of its assets in small-cap companies. It primarily invests in stocks of companies which are part of the Russell 2000 Growth index or have market capitalizations not exceeding the $3.5 billion mark. This small-cap fund returned 15.98% over the last one year period.
The small-cap fund has a minimum initial investment of $1000 and an expense ratio of 1.50% compared to a category average of 1.60%.
Homestead Small Company Stock (HSCSX) invests heavily in undervalued stocks of small companies with significant growth potential. The fund focuses on acquiring common stocks of small companies whose market capitalization is identical to companies included within the Russell 2000 index. It is a no-load fund.
This small-cap fund returned 32.92% over the last one year period and has a ten year annualized return of 9.4%.
Invesco Van Kampen Small Cap Growth A (VASCX) seeks long-term capital appreciation by investing in small-cap companies. The fund invests heavily in equity securities of companies whose capitalization range has been within the Russell 2000 index for the last two years. Up to 10% of its assets may be invested in real estate investment trusts. This small-cap fund returned 15.79% over the last one year period.
The fund manager is Matthew Hart and he has managed this small-cap fund since 2000.
Fidelity Small Cap Discovery (FSCRX) invests heavily in small-cap companies. These firms must be within the market cap range of the Russell 2000 index or the S&P SmallCap 600 index at the time of purchase. The fund may purchase foreign securities and enter into futures contracts. It may invest in both growth and value stocks. This small-cap fund has a five year annualized return of 4.76%.
As of April 2010, this small-cap fund held 60 issues, with 3.64% of its total assets invested in Fidelity Revere Str Tr.
Longleaf Partners Small-Cap (LLSCX) seeks long-term capital appreciation by investing in small-cap companies. Equity securities, including related convertible securities constitute the fund’s major investments. Up to 30% of its assets may be used to purchase foreign securities. The fund returned 32.05% in the last one year period.
The small-cap fund has an expense ratio of 0.95% compared to a category average of 1.37%.
To view the Zacks Rank and past performance of all small-cap funds, then click here.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank athttp://www.zacks.com/funds/mutualfund/
