Risk-loving investors, who give precedence to capital appreciation over dividend payouts, may consider small-cap growth 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 in value 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 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 against any global downturn.
Below we share with you three top-rated, small-cap growth mutual funds. 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 growth funds.
Vanguard Explorer Investor (VEXPX - Free Report) normally invests its assets in common stocks of small-cap companies, which are expected to have strong growth prospects. The fund generally has various investment advisors. Vanguard Explorer Investor has a three-year annualized return of 5.2%.
Chad Meade is one of the fund managers of VEXPX since 2014.
T. Rowe Price QM US Small-Cap Growth Equity (PRDSX - Free Report) seeks capital appreciation over the long run. PRDSX invests a lion’s share of its assets in securities of growth oriented companies with small size market capitalizations. Though PRDSX primarily focuses on acquiring securities of domestic companies, it may also invest not more than 10% of its assets in securities of companies located in foreign lands. T. Rowe Price QM US Small-Cap Growth Equity has a three-year annualized return of 7.8%.
As of December 2016, PRDSX held 302 issues, with 0.98% of its assets invested in Burlington Stores Inc.
TCM Small Cap Growth (TCMSX - Free Report) invests a large share of its assets in companies having market capitalizations similar to those listed in the Russell 2000 Index. TCMSX seeks growth of capital over the long term. TCM Small Cap Growth has a three-year annualized return of 6.9%.
Richard J. Johnson is the fund manager of TCMSX since 2004.
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 small-cap growth funds
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