Top 5 Small Cap Mutual Funds (April 2011)

Small-cap mutual funds are the preferred choice of investors willing to take a certain amount of risk while holding short term positions. In addition, smaller firms plough back a large portion of their profits back into their business on a regular basis. This assures shareholders of better performance and higher profits. When markets are booming, small cap mutual funds see high levels of demand which leads to significant increases in their prices. Investors seeking greater diversification would do well by adding small cap flavor 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.

Eaton Vance Small-Cap A (ETEGX) seeks long-term growth by investing in small-cap companies. The fund focuses on acquiring common stocks of domestic companies with an emphasis on growth stocks. Companies chosen for investment must have market capitalizations identical to those included in the S&P SmallCap 600 Index. This small-cap mutual fund has a five year annualized return of 8.48%.

The small-cap mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.45% compared to a category average of 1.52%.

Homestead Small Company Stock (HSCSX) invests a large proportion of its assets in undervalued stocks of small companies with significant growth potential. The market capitalization of these companies must be identical to firms which are part of the Russell 2000 index. This small-cap mutual fund has a ten year annualized return of 10.99%.

Stuart E. Teach is the fund manager and he has managed this small-cap mutual fund since 1998.

Invesco Small Cap Equity A (SMEAX) seeks long-term capital appreciation by investing in small-cap companies. The majority of the fund’s assets are invested in small companies within the market cap of the Russell 2000 index. It focuses on purchasing equity securities as well as convertible securities. The small-cap mutual fund returned 37.38% over the last one year period.

As of December 2010, this small-cap mutual fund held 104 issues, with 1.90% of its total assets invested in Ariba, Inc.

Turner Small Cap Growth (TSCEX) invests the majority of its assets in equity securities of domestic small-cap companies. It focuses on acquiring common stocks and investing in companies which have widely diversified operations. It tries to match sector concentrations as represented by the 200 Growth index. It is a no-load fund.

This small-cap mutual fund has a three year annualized return of 3.19%.

Pioneer Oak Ridge Small Cap Growth A (ORIGX) seeks long-term capital growth. It invests at least 80% of its assets in small-cap companies. It primarily invests in equity securities such as common stocks and convertible securities. The small-cap mutual fund returned 37.44% over the last one year period.

The small-cap mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.28% compared to a category average of 1.52%.

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

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