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. These 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 lower 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 funds.
Meridian Growth Fund Legacy Class MERDX aims for long-term growth of capital. The fund emphasizes small- and mid-capitalization growth companies and invests in securities of foreign companies, including emerging market companies. MERDX has three-year annualized returns of 10.1%.
As of the end of June 2020, MERDX held 90 issues, with 3.30% of its assets invested in Trinet Group Inc.
BlackRock Advantage Small Cap Growth Fund Investor A Shares CSGEX aims for long-term capital growth. The fund invests the majority of its assets in securities of small-capitalization companies. Its advisor defines these companies as those that have market capitalization in the range of those included on the Russell 2000 Index at the time of purchase. CSGEX has three-year annualized returns of 12.9%.
CSGEX has an expense ratio of 0.75% as compared to the category average of 1.22%.
Great-West Small Cap Growth Fund Investor MXMTX aims for long-term capital appreciation. The fund invests the majority of its assets in equity securities of small-cap companies whose market capitalization is on par with companies on the Russell 2000 Index at the time of purchase. MXMTX has three-year annualized returns of 13.7%.
Matthew R. DeCicco is one of the fund managers of MXMTX since 2015.
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 funds.
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