Small-cap growth mutual funds seek to provide a greater growth potential than the large- and mid-cap ones in an improving domestic economy. This is because small-cap stocks are closely tied to the domestic economy and have less international exposure. So, small-cap growth mutual funds are safer bets than their large- and mid-cap counterparts following the recent developments in the U.S. economy.
Companies with market capitalization below $2 billion and an impressive growth prospect generally constitute the portfolio of these mutual funds. Though small-cap stocks are believed to provide higher returns, they are also considered more volatile than the large- and mid-cap companies. These mutual funds provide excellent choices for investors preferring long-term capital appreciation over dividend payouts while seeking to protect their investments from global growth concerns.
Below we share with you three top-ranked small-cap growth mutual funds. Each has earned 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 growth funds.
Franklin Small Cap Growth Class A (FSGRX – Free Report) seeks appreciation of capital for the long run. FSGRX invests a bulk of its assets in the equity securities of small cap companies whose market-cap does not exceed $1.5 billion or that have the largest market capitalization in the Russell 2000 Index, whichever is larger. Franklin Small Cap Growth Class A has returned 23% over the last one-year period.
FSGRX has an expense ratio of 1.11% compared with the category average of 1.29%.
Hartford Small Company HLS (HDMBX – Free Report) invests in common stocks of companies that have strong capital growth potential. HDMBX’s sub-adviser, Wellington Management Company, LLP, invests the lion’s share of its assets in common stocks of companies that fall within the range of both the Russell 2000 and S&P SmallCap 600 Indices. The fund seeks appreciation of capital. Hartford Small Company HLS has returned 26% over the last one-year period.
