Small-Cap Funds

In a notoriously risky arena, these quality funds have largely kept a lid on volatility.

Although it makes sense to anchor the stock sleeve of a portfolio in high-quality, wide-moat blue chips, diversification across the style box will ensure at least some participation in all market environments. Small caps are generally considered to be more volatile than large, and that’s borne out by higher standard deviations relative to large caps over time. Because their businesses aren’t as diverse and their financial health may not be as strong as large firms, small caps as a group tend to struggle more than large firms in recessionary environments. But they can also outperform when the winds change. For this list, we looked for highly rated small-cap funds (value, growth, and blend), but also screened out any funds that had above-average Morningstar Risk Ratings. Though small caps can be a roller coaster, investors in these funds have had a somewhat smoother ride.

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Name	Ticker	Morningstar Category	Morningstar Rating for Funds Overall	Total Return 1 Year	Total Return 3 Year	Total Return 5 Year
Applied Finance Explorer Investor	AFDVX	Small Value		26.41%	7.49%	14.80%
Zbgbb Szxjdcx Xgdj Xbvtb Fj Dfmgp	WWQSX	Small Growth		9.22%	−10.32%	0.20%
Tpsswlss Btwhs Pdh Mywbml Fgypbbbyl	CWZHB	Small Growth		13.05%	2.24%	12.55%
XQZ Lscwp Qkk Trtrbdw	JQRML	Small Growth		13.79%	4.12%	10.41%
PDR Tmrxyq Zfxj Wdrsz Mxy Sppqt Cdvqjbfytf	ZDZFJ	Small Value		20.43%	3.84%	—
MSH Nwgslh Zyzt Zrpkp Ytr Twbgl Wj	VHPGYT	Small Value		20.36%	3.76%	9.45%
Pqfskyyn TNJM Qgvblznf Cpyhwr Vd	JKYYQD	Small Blend		20.29%	0.45%	8.08%
Lrmzjkt Czfzdbrkx Sd Ls Rtr Jbgcc	KVDTWF	Small Value		27.41%	6.37%	9.44%
RvmlvpWyprhw Mnmwmbksgw Lr-Rz Fl Szkcb	NNRLB	Small Growth		39.72%	5.94%	16.18%
JDG Dylkx Zpf Prtxjlm Vwtl Zbvsh KWXY	PGNRRL	Small Growth	—	19.05%	—	—
MPJ Dznwx Lxk Kjtytxw K	ZYVPX	Small Growth	—	18.91%	—	—
WSH Vzygb Bnz Ctklfxv YWGF	NFXFYS	Small Growth	—	18.94%	—	—
Tqtc Hwgqc Rbkyf-Gyl Mbvxqd Lsyxypqwp	QFQHY	Small Growth		29.92%	0.53%	14.47%
Cgtmhlzh Ndqpybj Hfxcss	XDCXM	Small Growth		13.12%	−0.31%	6.83%
Glzqcr Nvvyg Rwssk Wnh Mvyyzt Stmzls	FCNTF	Small Blend		23.24%	2.29%	8.31%
Scwfhx Mmfsv Vlbvn Drb Cdbpgw Bjtp	LNYBW	Small Blend		22.46%	2.16%	8.44%
Nzjnqw Zhgpb Xnvbn Ywq Vqnfcs Tnsbl	MWKP	Small Blend		22.23%	2.01%	8.30%
Bwtxnh Nlqms Crzdr/Tzb Fkb Qj Mfrnqjmb	NSMYX	Small Blend		27.54%	4.67%	11.55%
Lfkndd Cbmll Lktwc/Wdy Zfj Bg Jdnd	LGQKP	Small Blend		27.45%	4.60%	11.47%
Bjlmyr Gfjmx Hkrfc/Qcl Ltq Hh Ppmkn	PZNPQX	Small Blend		27.19%	4.42%	11.25%
Qlxjkwqz Ynxjs-Xknsmr	NZVYP	Small Growth		19.44%	7.48%	15.20%
Rjvkkvfs Lgsfq-Ssj Wrykffxmrnfw	NZFXX	Small Growth		22.30%	9.77%	16.75%
Vdthycsvm Mvxknmdh Tsvgz-Gbx Xlfgqj	WFXH	Small Blend		19.70%	0.42%	8.49%
Wwmhqmlb Dzyw Zfnqq Ggm Yjc	RBPHZ	Small Value	—	21.42%	—	—
Hcmwb Qghj Xwrwv Ngl Xjjskzntsfssp Lvm	XRMZF	Small Growth		18.89%	3.09%	9.52%
Glkytsfd Ndlttpvkb Vrqgs-Tjg Zfblcg	JBZJVQ	Small Blend		26.52%	5.58%	10.47%
Rsvhggjqxzm RF Qkdvr Gcp Vwp	TKCF	Small Value		28.37%	5.55%	10.15%
Vdjflrz Dksx Qdnkbw	CPKNS	Small Growth		24.45%	−1.22%	10.00%
Kksxgcp Lrcyg Cyybzp	XGBV	Small Growth		21.77%	−11.24%	8.16%
Wkkzgdk Bxskw Rdv Qwcsq	VKYSM	Small Growth		17.75%	−4.44%	9.52%
Szvflkc Zfbtg Rrw Cztqrf Yvwkhb	PZKBJ	Small Growth		12.34%	−11.40%	5.25%
Ylkkksp Mbgqq Wtb Xbrtt	MMCFF	Small Blend		31.83%	3.37%	9.05%
Kljrvvl Nryxt Ljjwqkdq	FSXCD	Small Growth		13.76%	−12.60%	7.28%
Tngzlmlmj J&T MjczrXdj 326 CKM XQ	SGF	Small Blend		21.06%	1.41%	—
sWdrvjh Yvttklb Thnxh/Xsm-Mkv Tmp Hxf K	GZPYC	Small Blend		18.12%	−0.53%	7.83%

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List Criteria

Small-Cap U.S. Funds

Rather than a fixed number of “large cap” or “small cap” stocks, Morningstar uses a flexible categorization system that isn’t adversely affected by overall movements in the market. Large-cap stocks are defined as the group that accounts for the top 70% of the capitalization of each geographic area; mid-cap stocks represent the next 20%. Small-cap stocks represent the balance.

Gold-Rated Funds

The Medalist Rating for funds reflects our forward-looking assessment of a fund’s ability to outperform its peer group (funds in the same category) and benchmark on a risk-adjusted basis over the long term. We assign the ratings on a five-tier scale with three positive (Medalist) ratings of Gold, Silver, and Bronze; a Neutral rating; and a Negative rating. If a fund receives a Gold, Silver, or Bronze rating, it means that Morningstar analysts expect it to outperform over a full market cycle of at least five years.

Morningstar Risk: Average or Below

The Morningstar Risk Rating sizes up the variations in a fund’s monthly returns, with an emphasis on downside variations, in comparison to similar funds. In each Morningstar Category, the 10% of funds with the lowest measured risk are described as Low Risk, the next 22.5% Below Average, the middle 35% Average, the next 22.5% Above Average, and the top 10% High. Morningstar Risk is measured for up to three time periods (three, five, and 10 years). These separate measures are then weighted and averaged to produce an overall measure for the fund.

Open to New Investment

All the funds on this list are open for new investment. Sometimes mutual funds will close to new investors when the fund is receiving more money than the management team believes it can invest effectively. Closing a fund under these circumstances is usually considered investor-friendly, as funds that get too big can sometimes suffer performance problems later. Even though new investors can’t get into closed funds (so such funds are not included here), closed funds that are rated Gold, Silver, or Bronze may be worth putting on a watch list.

Share Class Exclusions Applied

Many fund families offer multiple versions of the same fund but with variations on the sales fees that are charged and/or investor qualifications. In some cases, certain share classes may be for institutions (such as company retirement funds) or otherwise have a high investment minimum. We've limited our list to funds that are primarily used by and available to individual, or retail, investors.