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 four top-ranked, small-cap growth mutual funds. Each has 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 funds.
Lord Abbett Developing Growth Fund Class A LAGWX aims for capital growth over a long period of time. The fund invests the majority of its assets in equity securities of small companies and a minority of it in foreign companies. The fund’s investments consist of an actively managed and diversified portfolio, which comprises developing growth companies. LAGWX has returned 38.6% on a year-to-date basis.
As of May 2019, LAGWX held 94 issues, with 2.72% of its assets invested in Planet Fitness Inc A.
T. Rowe Price New Horizons Fund PRNHX seeks capital appreciation. The fund invests mostly in a diversified number of small, emerging growth companies.These companies are usually early in their corporate business cycles and largely unrecognized by the investment community. PRNHX has returned 30.5% on a year-to-date basis.
PRNHX has an expense ratio of 0.77% as compared to the category average of 1.17%.
Invesco Oppenheimer Discovery Fund Class A OPOCX mostly invests incommon stocks of American companies that the portfolio managers believe have potential for growth. The fund aims for capital growth and has the objective of investing in small-capitalization companies, whose market capitalization at the time of purchase is in the range of market capitalization in the Russell 2000 Growth Index. OPOCXhas returned 30.7% on a year-to-date basis.
Ash B. Shah is one of the fund managers of OPOCX since 2014.
TCM Small Cap Growth Fund TCMSX aims for capital growth by investing the majority of its assets in small capitalization companies’ stocks. According to the fund adviser, a small capitalization company is the one that has market capitalization in the range of those included on the Russell 2000 Index. TCMSX has returned 26.6% on a year-to-date basis.
TCMSX has an expense ratio of 0.94% as compared to the category average of 1.20%.
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 funds.
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