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		28.08%	7.29%	14.68%
Ncbxq Xlccjkb Rvkr Ccrrv Qd Bssvw	HCGYZQ	Small Growth		8.82%	−8.31%	0.36%
Thvkwjgb Rfwzs Bpc Pwpjrs Rdjvbws	ZMMLRT	Small Growth		14.50%	3.20%	12.97%
HZZ Tgqrd Lnt Tmrpwdjb	YMJT	Small Growth		15.71%	4.32%	10.79%
TFW Sndgrp Hhjd Gbzmj Djm Npxhn Jxcbphn	RSNZHV	Small Value		20.91%	4.38%	—
KXC Xttzdv Fqxl Lvkzx Ndb Gyhqd Rk	SWPVX	Small Value		20.85%	4.31%	9.85%
Hjcqzzwb BFWT Xwlmxmyb Gsplvr Wcypk	XJGRPJ	Small Blend		20.79%	1.10%	8.38%
Chgfjzy Cnbfqqywb Mj Qn Bgd Tqhrk	YCYJL	Small Value		27.45%	6.29%	9.69%
LtvcdmLhdmtk Dqvnqtqrmp Dl-Tz Kx Skby	FJXSXP	Small Growth		43.63%	8.36%	16.87%
FGL Frcql Zrk Jcxfytz Rjqc Trzrm	XLFNM	Small Growth	—	20.78%	—	—
DLM Pgvwx Ktg Bnznlvq	CXYCR	Small Growth	—	20.64%	—	—
ZQJ Chqfx Plb Vgrprdv CH	XXXQR	Small Growth	—	20.67%	—	—
Jrqx Hlxxn Wyrfm-Lxx Twlzry Hplsrbnjfpv	NMXP	Small Growth		33.96%	2.81%	14.72%
Fvskmfdw Fywnzdd Fndrmbf HM	NSRYS	Small Growth		14.36%	0.48%	7.09%
Tkwkhw Nbwnf Bqklm Lgz Pbjvnz Vwszdgggd	HGBGY	Small Blend		22.46%	2.16%	8.44%
Fhpcdh Hvxhx Kqltn/Wgc Tvp Cq Njgfdqcl	JRXDF	Small Blend		28.54%	5.25%	11.86%
Xfbghxcq Zvmsp-	CQJGKX	Small Growth		21.06%	8.71%	15.63%
Zrbvwmjj Vhhbg-Ygv Wnsnhbcbfj	ZWFXG	Small Growth		22.30%	9.77%	16.75%
Flfbqjhsk Mwkkxrlw Nxxhx-Lqf Bvnk	QBBN	Small Blend		20.53%	0.96%	8.80%
Qqpbhtdj Bnys Qtzfl Wdb Pv	XKBXJD	Small Value	—	21.42%	—	—
Wqkqk Mgrb Byrqq Pgk Tnryvrtwdlcfx Xz	ZTWZNR	Small Growth		21.17%	4.13%	9.92%
Flymmzsx Dvcbwclmn Wkhxf-Ssl Ycqglt X	WXNV	Small Blend		26.78%	6.10%	10.73%
Hdbhlrbzztl RY Ymndq Ynh Hsfkp	KNBXL	Small Value		29.00%	5.44%	10.44%
Hbthbrm Pksj Xqwnxg	WTSNJ	Small Growth		24.45%	−1.22%	10.00%
Qrfyqzd Mzrvn Hxz	XDVH	Small Growth		22.71%	−9.63%	8.32%
Bjkdjlh Zdvgw Dcn Wbw	VHFFZ	Small Growth		17.75%	−4.44%	9.52%
Prljjsr Gsksk Ftx Skrtyf Gcbyctq	ZXLN	Small Growth		14.14%	−9.64%	5.54%
Gpqlrvg Mlksw Xgw Dvsyy	ZZCK	Small Blend		33.11%	3.80%	9.40%
Vdjfyvg Kspcr Djv	XKSHBS	Small Growth		16.41%	−9.85%	7.39%
Hkxknppnk K&L LxcppBnk 741 PBS WG	JQQY	Small Blend		20.67%	1.78%	—
tVdhpmz Tcrgzbl Xwdnb/Dgr-Wxw Dcl Pft VC	YHNJLH	Small Blend		19.88%	0.52%	8.02%

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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.