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Risk-loving investors, who give precedence to capital appreciation over dividend payouts, may consider small-cap growth mutual funds for healthy returns. These funds focus on realizing an appreciable amount of capital growth by investing in stocks that are set to gain 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 with market cap less than $2 billion. The companies, smaller in size, offer growth potential and their market capitalization may increase subsequently. Also, due to their limited international exposure, small-cap funds offer higher protection than their large and mid-cap counterparts during economic downturns.
Below we share with you three top-ranked, small-cap growth mutual funds. Each has 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.
Franklin Small Cap Growth Fund Class A FSGRX aims for capital growth. The fund invests the majority of its assets in securities of small-capitalization companies. Small-capitalization companies are considered as those whose market-capitalization does not exceed $1.5 billion or the highest market-cap on the Russell 2000 Index. FSGRX has returned 15.2% over the past year.
As of May 2020, FSGRX held 120 issues, with 4.53% of its assets invested in DraftKings Inc Class A.
BlackRock Advantage Small Cap Growth Fund Investor A Shares CSGEX aims for capital growth over a long period. The fund invests the majority of its assets in securities of small-capitalization companies. Its advisor defines these companies as those that have market capitalizations in the range of those included on the Russell 2000 Index at the time of purchase. CSGEX has returned 9.9% over the past year.
CSGEX has an expense ratio of 0.75% as compared to the category average of 1.23%.
Putnam Small Cap Growth Fund Class A PNSAX aims for capital appreciation. The fund invests the majority of its assets in securities of small-capitalization companies. It focuses on those companies that have good potential for growth ahead compared to others. This is why the fund invests about 80% of its assets in securities of those companies that are similar in size to those included on the Russell 2000 Growth Index. PNSAX has returned 21.2% over the past year.
William J. Monroe is the fund manager of PNSAX since 2017.
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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