Top 5 Small Cap Mutual Funds

Small-cap funds are the preferred option for investors with a reasonable appetite for risk and the willingness to take short term positions. Further, it has been observed over time that smaller firms reinvest a significant share of their profits back into their business on a regular basis. This reassures shareholders of better performance and higher profits in the future. Small cap funds also experience higher demand when markets are surging which leads to significant increases in their prices. Investors looking for greater diversification could easily achieve their objective by adding small-cap funds to their portfolios.

Below we will share with you 5 top rated small-cap mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future.

SouthernSun Small Cap Investor (SSSFX) seeks long-term capital appreciation by investing in small-cap companies. The fund invests heavily in equity securities of companies whose capitalization range has been within the Russell 2000 index for the last year. This small-cap mutual fund returned 18.24% over the last one year period.

The fund manager is Michael W. Cook and he has managed this small-cap mutual fund since 2003.

First American Small Cap Select A (EMGRX) invests heavily in common stocks of small-cap companies. These firms must be within the market cap range of the Russell 2000 index at the time of purchase. This small-cap mutual fund has a ten year annualized return of 3.59%.

The small-cap mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.26% compared to a category average of 1.59%.

Wasatch Small Cap Growth (WAAEX) seeks capital appreciation with the secondary objective of current income. The fund invests heavily in equity securities of small-cap companies. The fund primarily invests in companies with growth potential with market capitalizations less than $2.5 billion. It is a no-load fund.

This small-cap mutual fund returned 11.71% over the last one year period and has a ten year annualized return of 4.38%.

Homestead Small Company Stock (HSCSX) invests heavily in undervalued stocks of small companies with significant growth potential. The fund focuses on acquiring common stocks of small companies whose market capitalization is identical to companies included within the Russell 2000 index. This small-cap mutual fund has a five year annualized return of 3.23%.

As of June 2010, this small-cap mutual fund held 39 issues, with 8.54% of its total assets invested in SSGA Fds.

Eagle Small Cap Growth A (HRSCX) seeks capital growth over the long term. The fund invests the majority of its assets in small-cap companies. These firms must be within the market cap range of the Russell 2000 index at the time of purchase for the last twelve months. This small-cap mutual fund returned 14.44% over the last one year period.

The fund manager is Bert Boksen and he has managed this small-cap mutual fund since 1995.

To view the Zacks Rank and past performance of all small-cap mutual funds, then click here.

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