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3 Small-Cap Value Mutual Funds for Solid Returns

A small-cap value fund is a good choice for investors seeking diversification across sectors and companies, and focusing on gaining exposure to stocks trading at a discount. Investors with a high-risk appetite tend to buy these funds. Small-cap funds generally invest in companies having a market cap of less than $2 billion. The companies, smaller in size, offer growth potential and can subsequently see an increase in market capitalization.

Value stocks are those that trade at a price lower than their fundamentals (i.e., earnings, book value, debt equity). It is a common practice to invest in value funds for income or yield.

However, not all value funds comprise only those companies that primarily use their earnings to pay out dividends. Investors interested in picking value funds for yield should check the mutual fund yield, which is the total dividend payout divided by the value of the mutual fund’s shares.

Below, we share with you three top-ranked small-cap value mutual funds, viz., DFA US Small Cap Value Fund DFSVX, Sterling Capital Behav Sm Cp Val Eq SPSAX and Vericimetry US Small Cap Value VYSVX. 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 Small Cap Value mutual funds.

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DFA US Small Cap Value Fund seeks long-term capital appreciation by investing in securities of U.S. companies. DFSVX advisors also invest in value stocks and securities having a high book value compared to their market value.

DFA US Small Cap Value Fund has three-year annualized returns of 13.9%. DFSVX has an expense ratio of 0.31% compared with the category average of 1.16%.

Sterling Capital Behav Sm Cp Val Eq fund seeks a long-term total return on investment. SPSAX invests in small-cap companies, defining them as firms with market capitalizations within the range of those companies on the Russell 2000 Index at the time of purchase.

Sterling Capital Behav Sm Cp Val Eq fund has a three-year annualized return of 12.2%. As of the end of June 2023, SPSAX held 237 issues, with 1.2% of its assets invested in Boise Cascade Co.

Vericimetry US Small Cap Value fund invests most of its assets in the common stock of domestic small-cap value companies at the time of purchase. VYSVX advisors invest in companies based on a market capitalization weighted approach to determine the target weighting of U.S. small-cap value stocks.

Vericimetry US Small Cap Value fund has a three-year annualized return of 11%. Mendel Fygenson has been one of the fund managers of VYSVX since September 2014.

To view the Zacks Rank and the past performance of all small-cap value mutual funds, investors can click here to see the complete list of small-cap value mutual funds.

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