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Mutual Fund Commentary

When investors have the willingness to take short term positions and the ability to bear a certain degree of risk, small-cap funds could be the correct choice. These funds generate significant demand driven sales during a market upswing, which lead to an increase in their prices. Smaller firms also look to continuously reinvest their profits back into their business. This reassures shareholders of superior performance and higher profit potential from such companies. Small Cap funds therefore make excellent additions to a well-diversified portfolio.

Below we will share with you 5 top rated small-cap mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all small-cap funds, investors can click here to see the complete list of funds.

Bridgeway Ultra-Small Company (BRUSX - MF report) seeks total return over the long term, focusing on capital growth. A majority of its net assets is invested in very small companies depending on the market cap. A maximum of 15% investment may be parked in securities issued by a foreign company. The small-cap mutual fund has a three year annualized return of 11.76%.

The small-cap mutual fund has a minimum initial investment of $2,000 and an expense ratio of 1.22% compared to a category average of 1.41%.

Calvert Small Cap A (CCVAX - MF report) invests a large share of net assets in small companies having a maximum market cap of $3 billion. A maximum of 25% of assets can also be invested in foreign securities. The small-cap mutual fund has a three year annualized return of 10.02%.

Natalie A. Trunow is the fund manager and he has managed this small-cap mutual fund since 2010.

Diamond Hill Small Cap A (DHSCX - MF report) seeks capital growth on a long-term basis. The fund invests the majority of its assets in companies having market cap below $2.5 billion and are attractively priced relative to their underlying value. The small-cap mutual fund has a three year annualized return of 9.8%.

As of May 2013, this small-cap mutual fund held 72 issues, with 3.09% of its total assets invested in Steiner Leisure Ltd.

James Small Cap (JASCX - MF report) invests in domestic and foreign companies which are attractively priced relative to their underlying value. A majority of the net assets is invested in equity securities of small cap companies. The small-cap mutual fund has a three year annualized return of 10.67%.

The small-cap mutual fund has a minimum initial investment $2,000 and an expense ratio of 1.50% compared to a category average of 1.41%.

Timothy Plan Small Cap Value A (TPLNX - MF report) seeks capital growth on a long-term basis. The fund focusses on acquiring small cap stocks having a market cap not exceeding $2 billion. Investments can also be parked in equity securities issued by foreign countries as American Depository Receipts (ADRs). The small-cap mutual fund has a three year annualized return of 13.09%.

Lisa R. Dong is the fund manager and he has managed this small-cap mutual fund since 2008.

To view the Zacks Rank and past performance of all small-cap mutual funds, investors can click here to see the complete list of funds.

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.

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