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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-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 9.1%.

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

JPMorgan Small Cap Growth (PGSGX - Free Report) seeks long-term growth of capital. PGSGX invests heavily in securities issued by small capitalization companies. The fund also invests in securities of emerging growth companies. The small capitalization companies are those whose market capitalization is similar to that of Russell 2000 Growth Index stocks. JPMorgan Small Cap has a three-year annualized return of 13.4%.

PGSGX has an expense ratio of 1.25% as compared to the category average of 1.26%.

Wasatch Ultra Growth (WAMCX - Free Report) invests heavily in equity securities of those small-cap companies that are expected to grow at a rapid pace. The fund may invest around 30% of its assets in equity securities of foreign companies based in developed and emerging markets. Wasatch Ultra Growth Investor has a three-year annualized return of 13.6%.

John Malooly is the asset manager of WAMCX since 2012.

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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