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The Best Performing Small Cap Mutual Funds • Benzinga

The words small cap, mid cap and large cap might not mean much to you if you are a novice investor. These are actually just fancy terms to describe the total capital of a particular company. For example, small cap mutual funds have a smaller market capitalization.

Here are three examples of each type of market cap:

As you can see, large-cap companies such as Apple are the most well-known. Alphabet, Starbucks, Amazon and Berkshire Hathaway are other examples of large cap companies. Rite Aid Corp. is a prime example of a mid-cap company, and CryoLife, Inc. (NYSE: CRY) is considered a small cap. If you’ve never heard of a particular small cap company, that’s okay. Typically, small-cap funds aren’t as well-known, but can still give your portfolio a big boost.

Quick Look: The Best Small Cap Mutual Funds:

  • Vanguard Small Cap Index Fund
  • T. Rowe Price QM US Small Cap Growth Equity Fund
  • T. Rowe Price New Horizons
  • Fidelity Small Cap Growth
  • BlackRock Advantage Small Cap Growth Fund

What are small cap mutual funds?

Small caps refer to companies with a relatively small market capitalization. The official capital amount may vary slightly between traders and the industry, but the market value parameters of shares outstanding in small-cap companies are typically between $300 million and $2 billion.

A small cap mutual fund is a collection of stocks handpicked by industry experts and sold as a pre-packaged bundle type. In this case, they are pooled stocks of many small-cap companies, which means they are more diversified than individual stocks.

Small Cap Mutual Funds tend to grow faster than large-cap mutual funds and typically use their growth to pay for expansion rather than pay dividends, as these companies typically seek to expand in order to gain market share.

Why Invest in Small Cap Mutual Funds?

Small cap mutual funds can be a fascinating study, especially at different times of any market cycle (bear and bull markets). Here are some inherent characteristics of all small caps:

  • They can be volatile. A group of companies exactly like CryoLife, Inc., compared to groups of companies like Alphabet and Starbucks, are going to be able to grow faster than large cap companies, but they are also inherently less stable because smaller companies cannot not survive market storms as well as large-cap companies can. Therefore, they tend to have a higher failure rate.
  • They provide opportunities for growth. If you’re a young investor and can handle a bit more risk, or are risk-tolerant by nature, the aggressive growth potential of small-cap mutual funds might appeal to you.
  • Mutual funds ensure that you are automatically diversified. In short, it means you’re not putting all your eggs in one basket. When investing in individual stocks, the opposite is true. If one company in your mutual fund group has a bad quarter, it probably won’t affect everything else in your portfolio. (On the other hand, if a single stock you’ve invested in goes down, you could immediately lose money.)
  • Performance can be outstanding. Historically, small cap stocks have outperformed large cap stocks. According to data from Morningstar Ibbotson, from 1926 to 2012, small cap stocks averaged an annual return of 12.28%, compared to 10.08% for large caps.
  • Matching your budget. You don’t want to put too many eggs in one basket. Thus, you can invest in mutual funds with smaller market caps to reduce your costs. You can, of course, expand to more expensive assets in the future.

Benzinga’s Top Picks

1. Vanguard Small Cap Index Fund (NAESX)

The Vanguard Small-Cap Index Fund totals approximately $93 billion and its holdings include more than 1,400 small companies. It tracks the CRSP US Small Cap Index, which is designed to include the bottom 2-15% of companies’ market capitalization. Its major holdings include the financial, consumer goods and industrials sectors and include Salix Pharmaceuticals, Foot Locker and Gannett Co.

For more information, including performance, fees and charges, see the fund at the Vanguard website, and also itdamn Benzinga Avant-garde review.

2. T. Rowe Price QM US Small Cap Growth Equity Fund (PRDSX)

The T. Rowe Price QM US Small Cap Growth Equity Fund seeks long-term growth by investing in a quantitative management strategy, which represents the “QM” in the fund’s name. Of the fund’s net assets, 23.3% is made up of health care, 20.5% of information technology, 16.8% of industrial and commercial services. The ten largest holdings include Bright Horizons Family Solutions, Burlington Stores, Cable One, Exact Sciences, Fair Isaac, HEICO, Molina Healthcare, Take-Two Interactive Software, Teledyne Technologies and Vail Resorts.

3. T. Rowe Price New Horizons (PRNHX)

This mutual fund seeks long-term capital growth by investing in the common shares of small, fast-growing companies. According to T. Rowe’s Quarterly Fund Fact Sheet, the T. Rowe Price New Horizons fund focuses on a diverse group of small, emerging growth companies. The fund may also invest in companies that offer accelerated earnings growth due to rejuvenated management, new products or structural changes in the economy.

4. Fidelity Small Cap Growth (FCPGX)

For the quarter ending September 30, 2018, shares in the Retail category of Fidelity Small Cap Growth Fund gained 8.30% and outperformed the Russell 2000 Growth Index. CarGurus, the most popular online auto retailer in the United States, was the fund’s top holding at the end of the quarter.

Led by technology and healthcare as well as a few regional banks, the Fidelity Small Cap Growth fund is made up of companies with strong competitive positions in growing markets among established and emerging producers.

Learn more details about the fundsincluding price and performance, and check out Benzinga’s Fidelity Investments review.

5. BlackRock Advantage Small Cap Growth Fund (CSGEX)

BlackRock Advisors’ Advantage Small Cap Growth Fund packs a punch with a five-year annualized return of 11.59%. The companies that make up its major holdings include Insperity, Inc., EastGroup Properties, Inc., Universal Forest Products, Inc., Comfort Systems USA, Inc. and Five Below, Inc. Its three major segments include healthcare, industry and information. technology.

Final Thoughts

Whether you choose index funds, which track a market index, or actively managed mutual funds (your fund manager chooses the funds), use Benzinga’s tools to your advantage. You’ll find the insight of a knowledgeable team at Benzinga to help you choose domestic small cap offerings and more.

Discover Benzinga Small Cap Analysis to explore small cap mutual funds that will fit right into your portfolio.


What is a Small Cap Mutual Fund?


A small cap mutual fund is a fund that includes stocks of companies with a small market capitalization.


Is growth possible with small cap mutual funds?


Small cap mutual funds offer growth because the funds are made up of stocks of companies that have room for growth.


Where can I find brokers who deal in small cap mutual funds?


You can find a list of brokers recommended by Benzinga in the list above.


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