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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.

Pioneer Oak Ridge Small Cap Growth A (ORIGX - MF report) seeks long-term capital growth. The fund invests a large share of its assets in small-cap companies. A maximum of 20% of its assets may be utilized to purchase foreign equity and debt securities. The small-cap mutual fund has a five year annualized return of 5.15%.

The small-cap mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.40% compared to a category average of 1.46%.

Needham Small Cap Growth (NESGX - MF report) invests the majority of its assets in domestic equity securities of companies traded on the NASADQ with market capitalizations of less than $3 billion at the time at which they are purchased. The small-cap mutual fund is non-diversified and has a five year annualized return of 4.51%.

Chris J. Retzler is the fund manager and he has managed this small-cap mutual fund since 2008.

JHancock Small Cap Equity A (SPVAX - MF report) seeks capital growth. The fund invests a large proportion of its assets in small companies. A maximum of 5% of its assets may be invested in any one instrument. Not more than 10% of its assets may be invested in cash or cash equivalents. The small-cap mutual fund has a five year annualized return of 3.11%.

The small-cap mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.28% compared to a category average of 1.46%.

AllianceBernstein Small Cap Growth A (QUASX - MF report) invests a large proportion of its assets in equity securities of companies falling within the bottom 20% of the total U.S equities in terms of market capitalization. At any given time, the fund invests in around 95 to 125 companies. The small-cap mutual fund has a five year annualized return of 6.85%.

As of March 2012, this small-cap mutual fund held 99 issues, with 1.72% of its total assets invested in CoStar Group, Inc.

Virtus Small-Cap Sustainable Growth A (PSGAX - MF report) seeks capital appreciation over the long term. The fund invests in small cap companies while maintaining the risk profile of the S&P 500 which consists entirely of large cap companies. The small-cap mutual fund has a five year annualized return of 4.98%.

Todd A. Beiley 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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