Investors with a reasonable appetite for risk and the willingness to ride out periods of market volatility often seek out small-cap funds. This category of funds has great potential primarily due to two factors. Historically small cap companies are one of the best investments when the economy recovers. Secondly it has been observed that companies with smaller market capitalizations usually reinvest most of their profits back in to the business, as opposed to paying dividends. Thus shareholders can see better performance and profit potential from such firms. Small-cap funds thus make a good addition to a well diversified portfolio and can help investors reap maximum gains from a rising market.
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.
Driehaus International Small Cap Growth (DRIOX) seeks capital growth by investing in stocks of small-cap non-U.S. companies with strong growth potential. The majority of its assets are invested in companies with market capitalizations of those included in the MSCI All Country World ex USA Small Cap Growth index. This small-cap fund returned 14.96% over the last one year period.
Howard Schwab is the fund manager and has managed this small-cap fund since 2007
Royce Micro-Cap (RYOTX) invests at least 80% of its assets in companies with market capitalizations less than $500 million which are believed to be undervalued. At least 25% of its assets are used to purchase foreign securities. It is a no-load fund.
This small-cap fund returned 58.32% over the last one year period and has a five year annualized return of 5.68%.
Skyline Special Equities (SKSEX) seeks capital appreciation. It invests the majority of its assets in common and preferred stocks of small-cap U.S. companies. The fund focuses on those firms whose outstanding shares have an aggregate market value of less than $2 billion. The fund has a ten year annualized return of 8.64% The small-cap fund has a minimum initial investment of $1,000 and an expense ratio of 1.33% compared to a category average of 1.50%.
Wasatch Emerging Markets Small Cap (WAEMX) invests the largest share of its assets in small-cap companies from emerging markets. Companies under consideration for investment should have market capitalizations of less than $3 billion. This small-cap fund is non-diversified and returned 128.02% over the last one year period.
As of December 2009, this small-cap fund held 135 issues, with 1.65% of its total assets invested in Coca Cola Icecek Sanayi A.S.
Fidelity Small Cap Stock (FSLCX) seeks long-term capital growth by investing a large share of its assets in small-cap companies. It focuses on firms with market capitalizations similar to those included in the Russell 2000 index or S&P SmallCap 600 index. The fund returned 67.88% in 2009 and has a ten year annualized return of 6.84%. The fund manager is Andrew Sassine and he has managed this small-cap fund since 2008.
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 at http://www.zacks.com/funds/mutualfund/
