Top 5 Small Cap Mutual Funds (Oct. 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.

Fidelity Small Cap Stock (FSLCX) seeks capital appreciation over the long term. The fund invests the majority of its assets in common stocks of small cap firms. Companies invested in must have market capitalizations within the range of the Russell 2000 Index or the S&P SmallCap 600 Index. This small-cap mutual fund has a three year annualized return of 2.55%.

The small-cap mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.12% compared to a category average of 1.33%.

Wells Fargo Intrinsic Small Cap Value (SCOVX) invests heavily in equity securities of small-cap companies. These firms must have market capitalizations within the range of the Russell 2500 Index. The funds may utilize synthetic instruments to lower risk or provide higher returns. The small-cap mutual fund returned 19.65% over the last one year period.

The fund manager is Samir Sikka and he has managed this small-cap mutual fund since 2010.

Buffalo Small Cap (BUFSX) seeks long term capital appreciation. The fund invests a large proportion o f its assets in common, preferred stocks and related convertible securities of domestic small-cap companies. The small-cap mutual fund has a five year annualized return of 2.64%.

The small-cap mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.01% compared to a category average of 1.52%.

Federated MDT Small Cap Growth A (QASGX) invests heavily 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. The small-cap mutual fund returned 36.28% over the last one year period.

As of June 2011, this small-cap mutual fund held 163 issues, with 2.03% of its total assets invested in Fortinet, Inc.

Turner Small Cap Growth (TSCEX) seeks capital growth. The fund invests the majority of its assets in equity securities of domestic small-cap companies. The fund 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.

The small-cap mutual fund has a ten year annualized return of 5.17%.

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

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds.

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