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Russell 2000 Posts Gains for 6 Straight Weeks: 5 Fund Picks

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Key indexes like the Dow, the S&P 500 and the Nasdaq, including the Russell 2000, posted weekly gains for the week ended Jun 8. All the three key U.S. indexes ended in the green for the third consecutive week. Meanwhile, the Russell 2000 posted six straight weeks of gains, the longest winning streak of rise since 2016.

Additionally, the weak outlook for some of the major economies outside the U.S. has shifted investor attention from foreign markets to the domestic circuit. In this respect, the Russell 2000 gained as small-cap stocks have lesser international exposure and are focused domestically. For investors with a high risk appetite and return expectations, funds focused on small-cap growth stocks are the best bets given the current market environment.

What Drove the Small-Cap Index Higher?

The Russell 2000 index has jumped 8.9% so far this year, which is considerably higher than the Dow’s increase of 2.4% and the S&P 500’s rise of 3.9% during the same period. Economic slowdown in Europe has brought investor focus back on the United States. Additionally, the Trump government has hinted at a stricter stance while levying import tariffs, which also weighed on several countries.

In this context, shifting to funds focused on small-cap stocks that have significant exposure in the domestic market is clearly a wise investment. Also, the Russell 2000 Index performed better than several key indexes, making small-cap growth funds strong investments.

Though small-cap funds are believed to have a higher level of volatility compared with large- and mid-cap funds, these have greater growth potential and are expected to maintain this momentum in the coming months. Hence, risk-loving investors can pick these funds to gain following the recent gains in the Russell 2000 Index.

Buy These 5 Small-Cap Growth Mutual Funds

In this circumstance, we have selected five mutual funds, which have significant exposure to small-cap growth stocks. Moreover, these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). These funds also have encouraging one-year and year-to-date (YTD) returns and minimum initial investment is within $5000. Also, each of these funds has a low expense ratio.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why should one be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Hartford Small Company HLS (HDMBX - Free Report) invests in common stocks of companies that have strong capital growth potential. HDMBX’s sub-adviser, Wellington Management Company, LLP, invests the bulk of its assets in common stocks of companies that fall within the range of both the Russell 2000 and S&P SmallCap 600 Indices.

HDMBX carries an expense ratio of 1.03% compared with the category average of 1.25%. Moreover, HDMBX requires a minimal initial investment of $0. The fund has one-year and YTD returns of 28.5% and 12.2%, respectively.

HDMBX has a Zacks Mutual Fund Rank #1. Further, Steven C. Angeli is one of the fund managers of HDMBX since 1999.

Fidelity Small Cap Growth (FCPGX - Free Report) invests the majority of its assets in equity securities of small-cap companies. The fund invests both in domestic and foreign companies, which Fidelity Management & Research Company (FMR) perceives as having significant growth prospects.

FCPGX carries an expense ratio of 1.09% compared with the category average of 1.25%. Moreover, FCPGX requires a minimal initial investment of $2,500. The fund has one-year and YTD returns of 32.3% and 13.1%, respectively.

FCPGX has a Zacks Mutual Fund Rank #2. Further, Patrick Venanzi is one of the fund managers of FCPGX since 2011.

Invesco Small Cap Growth Fund Investor (GTSIX - Free Report) invests a large chunk of its assets invests in equity securities including common stocks in small-cap companies. The market capitalization of these companies is not more than the largest capitalized issuer listed on the Russell 2000 Index.

GTSIXcarries an expense ratio of 1.19% compared with the category average of 1.25%. Moreover, GTSIX requires a minimal initial investment of $1,000. The fund has one-year and YTD returns of 25.9% and 9.5%, respectively.

GTSIXhas a Zacks Mutual Fund Rank #2. Further, Juan R. Hartsfield is one of the fund managers of GTSIX since 2004.

ClearBridge Small Cap Growth A (SASMX - Free Report) seeks capital appreciation over the long run. SASMX invests a large part of its assets in equities of small-cap firms. SASMX invests in domestic companies that are believed to have impressive growth prospects.

SASMX carries an expense ratio of 1.23% compared with the category average of 1.25%. Moreover, SASMX requires a minimal initial investment of $1,000. The fund has one-year and YTD returns of 33% and 16.8%, respectively.

SASMX has a Zacks Mutual Fund Rank #1. Further, Aram E. Green is one of the fund managers of SASMX since 2007.

Northern Small Cap Core Fund (NSGRX - Free Report) seeks appreciation of capital over the long haul. NSGRX invests a huge portion of its assets in equity securities of small-cap companies with market cap in the range of the Russell 2000 Index. 

NSGRX carries an expense ratio of 0.67% compared with the category average of 1.16%. Moreover, NSGRX requires a minimal initial investment of $2,500. The fund has one-year and YTD returns of 9.9% and 0.4%, respectively.

NSGRX has a Zacks Mutual Fund Rank #1. Further, Robert H. Bergson is the fund manager of NSGRX since 2010.

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