Top 5 Small Cap Mutual Funds (Jan. 2011)

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. Small cap funds also experience high 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.

Putnam Small Cap Growth A (PNSAX) seeks long-term capital appreciation by investing in small-cap companies. The fund focuses on acquiring common stocks of domestic companies with an emphasis on growth stocks. This small-cap mutual fund returned 28.12% over the last one year period.

The small-cap mutual fund has a minimum initial investment of $500 and an expense ratio of 1.39% compared to a category average of 1.55%.

T. Rowe Price Small-Cap Stock (OTCFX) invests heavily in small-cap companies. The fund invests across various economic sectors and without regard to company size. Not more than 1.5% of its assets may be invested in a single company. This small-cap mutual fund has a ten year annualized return of 8.88%.

The fund manager is Gregory A. McCrickard and he has managed this small-cap mutual fund since 1992.

Federated MDT Small Cap Growth A (QASGX) seeks long-term capital growth. The fund invests a large share of its assets in domestic small cap companies. It focuses on acquiring common stock and invests in firms which are identical to those which are part of the Russell 2000 growth index. This small-cap mutual fund returned 29.06% over the last one year period.

As of September 2010, this small-cap mutual fund held 148 issues, with 2.07% of its total assets invested in Amerigroup Corporation.

AllianceBernstein Small Cap Growth A (QUASX) invests heavily in equity securities of small-cap companies with market capitalizations of less than $10 million. At any given time the fund invests in between 95 to 125 companies. This small-cap mutual fund has a five year annualized return of 6.11%.

The small-cap mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.60% compared to a category average of 1.55%.

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 35.09% 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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