Risk-loving investors, who give precedence to capital appreciation along with dividend payouts, may consider small-cap blend 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 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 a 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-rated, small-cap growth mutual funds, namely Vanguard Strategic Small-Cap Equity Fund Investor Shares VSTCX, DFA U.S. Micro Cap Portfolio DFSCX and Davenport Small Cap Focus Fund DSCPX. 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 blend funds.
Vanguard Strategic Small-Cap Equity Fund Investor Shares invests most of its net assets, in domestic equity securities of small-capitalization companies, which its advisors believe have strong growth prospects as well as reasonable valuations with respect to their industry peers. VSTCX advisors choose to invest using a quantitative process while maintaining a risk profile similar to that of MSCI US Small Cap 1750 Index.
Vanguard Strategic Small-Cap Equity Fund Investor Shares has three-year annualized returns of 19.1%. As of the end of December 2022, VSTCX had 502 issues and invested 0.85% of its net assets in Emcor Group.
DFA U.S. Micro Cap Portfolio fund invests most of its net assets in a broad and diverse group of domestic micro-cap companies using a market-capitalization weighted approach. DFSCX advisors also purchase or sell futures contracts and options of U.S. equity securities and indices.
DFA U.S. Micro Cap Portfolio has three-year annualized returns of 18.8%. DFSCX has an expense ratio of 0.41% compared with the category average of 1.03%.
Davenport Small Cap Focus Fund invests most of its assets, along with borrowings, if any, in common stocks of small-cap companies that its advisors believe have significant potential for capital appreciation. DSCPX advisors also invest in shares of registered investment companies, which invest primarily in stocks of small-capitalization companies.
Davenport Small Cap Focus Fund has three-year annualized returns of 18.7%. Christopher G. Pearson has been one of the fund managers of DSCPX since December 2014.
To view the Zacks Rank and the past performance of all small-cap blend mutual funds, investors can click here to see the complete list of small-cap blend mutual funds.
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