Risk-loving investors, who give precedence to capital appreciation along with dividend payouts, may consider small-cap blend 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 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 a 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 in any global downturn.
Below, we share with you three top-ranked small-cap blend mutual funds, namely Fidelity Series Small Cap Discovery Fund FJACX, DFA U.S. Micro Cap Portfolio DFSCX and Fuller & Thaler Behavioral Small-Cap Equity Fund FTHNX. 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 funds.
Fidelity Series Small Cap Discovery Fund invests most of its net assets in small-cap companies with a market cap similar to the Russell 2000 Index or the S&P SmallCap 600 Index at the time of purchase. FJACX chooses to invest in growth or value stocks by using fundamental analysis of factors like financial condition, industry position, as well as market and economic conditions.
Fidelity Series Small Cap Discovery Fund has returned 7.8% over the past three years. As of October 2022, FJACX held 78 issues, with 3.4% of its assets invested in FirstCash Holdings.
DFA U.S. Micro Cap Portfolio fund invests most of its net assets in a broad and diverse group of domestic micro-cap companies using a market-capitalization-weighted approach. DFSCX advisors also purchase or sell futures contracts and options of U.S. equity securities and indices.
DFA U.S. Micro Cap Portfolio has three-year annualized returns of 7.6%. DFSCX has an expense ratio of 0.42% compared with the category average of 1.03%.
Fuller & Thaler Behavioral Small-Cap Equity Fund seeks long-term capital appreciation. For this purpose, FTHNX invests most of its net assets in common stocks of small-cap companies based in the United States.
Fuller & Thaler Behavioral Small-Cap Equity Fund has returned 9.8% over the past three years. Raife Giovinazzo has been one of the fund managers of FTHNX since February 2013.
To view the Zacks Rank and the past performance of all small-cap blend mutual funds, investors can click here to see the complete list of small-cap blend mutual funds.
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