Small-cap funds generally invest in companies having a market cap of less than $2 billion. The companies, smaller in size, offer growth potential, and their market capitalization may increase subsequently. Less international exposure makes small-cap funds less vulnerable to a stronger U.S. dollar.
Though small-cap stocks are believed to provide greater returns, they are also expected to be more volatile than large and mid-cap companies. Also, growth funds may experience more fluctuations than the other fund classes.
Risky investors who prefer capital appreciation over dividend payout may consider small-cap growth mutual funds. Growth funds focus on realizing an appreciable amount of capital growth by investing in stocks projected to rise in value over the long term. Meanwhile, small-cap funds are good choices for investors seeking diversification across different sectors and companies.
Below, we share with you three small-cap growth mutual funds, namely, AMG GW&K Small/Mid Cap Growth Fund – N ACWDX, DFA – U.S. Small Cap Growth Portfolio DSCGX and Invesco Discovery Fund OPOCX. 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 funds.
AMG GW&K Small/Mid Cap Growth Fund – N seeks long-term capital appreciation by investing most of its assets, along with borrowings, if any, in securities of small- and mid-capitalization quality companies with growth-oriented characteristics. ACWDX advisors define small- and mid-capitalization companies as those with market capitalization similar to that of companies listed on the Russell 2500 Growth Index.
AMG GW&K Small/Mid Cap Growth Fund – N has three-year annualized returns of 8.9%. As of the end of July 2022, ACWDX had 80 issues and 4.55% of its assets were invested in short-term investment.
DFA – U.S. Small Cap Growth Portfolio invests most of its assets in securities of small-cap U.S. companies, which its advisors believe as having high profitability and relative prices compared to other U.S. small-cap companies during the time of purchase. DSCGX advisors generally invest in a portfolio of a broad and diverse group of readily marketable securities using a market-capitalization-weighted approach.
DFA – U.S. Small Cap Growth Portfolio has three-year annualized returns of 7.3%. DSCGX has an expense ratio of 0.35% compared with the category average of 1.21%.
Invesco Discovery Fund invests most of its net assets in common stocks of small-capitalization companies, which portfolio managers believe have favorable growth prospects. OPOCX advisors consider small-cap companies as those with market capitalization similar to those listed on the Russell 2000 Growth Index at the time of purchase.
Invesco Discovery Fund has three-year annualized returns of 6.0%. Ronald J. Zibelli has been one of the fund managers of OPOCX since May 2006.
To view the Zacks Rank and the past performance of all small-cap growth mutual funds, investors can click here to see the complete list of small-cap growth mutual funds.
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