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3 Strong Buy Small-Cap Growth Funds to Scoop Up

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Small-cap growth funds are natural choices for investors with a high risk appetite when capital appreciation over the long term takes precedence over dividend payouts. 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-ranked, 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.

Victory RS Small Cap Growth A (RSEGX - Free Report) seeks appreciation of capital for the long run. RSEGX invests the lion’s share of its assets in those small-cap companies, which are expected to have market-cap lower than $3 billion or 120% of the market cap of the biggest company included on the Russell 2000 Index. Although, the fund picks mostly domestic companies, it may also invest in non-U.S. companies. Victory RS Small Cap Growth A has returned 29.4% in the last one-year period.

As of June 2017, RSEGX held 90 issues, with 3.00% of its assets invested in RingCentral Inc Class A.

Franklin Small Cap Growth R FSSRX invests a bulk of its assets in common stocks of those small-cap companies whose market-cap is either lower than $1.5 billion or from the biggest company on the Russell 2000 Index, whichever is higher. FSSRX seeks appreciation of capital for the long run. Franklin Small Cap Growth R has returned 14.4% in the last one-year period.

FSSRX has an expense ratio of 1.33% compared with the category average of 1.44%.

Vanguard Explorer Investor VEXPX seeks capital growth for the long run. VEXPX 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 returned 19.4% in the last one-year period.

Chad Meade is one of the fund managers of VEXPX since 2014.

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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