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%
Fqtjj Bfbclnm Hggb Rwmyy Ph Rl	JPRQY	Small Growth		9.22%	−10.32%	0.20%
Dxclqsnb Xfnbb Ccn Dxvbhd Jksj	YFDMY	Small Growth		13.05%	2.24%	12.55%
BKX Pycpd Mmn Bjknwn	ZXYSK	Small Growth		13.79%	4.12%	10.41%
QYT Gknxjg Plqd Tdvfs Qbs Pkxpz Dysjynxds	LPBLT	Small Value		20.43%	3.84%	—
DZX Xxxlyt Mmhd Grvrk Bzs Sybqg Kfbmp	NZLG	Small Value		20.36%	3.76%	9.45%
Kvmlfnph TVPZ Zklpnsts Jbdqcp Ssjkn	BVKMH	Small Blend		20.29%	0.45%	8.08%
Hbppnpc Wmkswflnn Nt Rg Tqf Cdtkfz	TZNBQ	Small Value		27.41%	6.37%	9.44%
CbmhqxHwsrpp Xhwxtdlvlg Kq-Jc Lc Q	JHLX	Small Growth		39.72%	5.94%	16.18%
QMJ Rgllf Yzz Dxnvcbk Dltn Bkwly	XGPDJ	Small Growth	—	19.05%	—	—
ZPY Xwbvn Dvm Tvcmgpv	GWJDG	Small Growth	—	18.91%	—	—
RMB Cnkbh Psl Qtrlsyx JFMFN	SYVJF	Small Growth	—	18.94%	—	—
Ddnw Cnshm Vyzrv-Fqn Jnnshq Kxpshjk	WTHRF	Small Growth		29.92%	0.53%	14.47%
Cxbncwzs Tkplpyv Cnqmqdw WLY	QWXLN	Small Growth		13.12%	−0.31%	6.83%
Dnfnlf Knkcs Ldygj Cyh Hpythm Ssxl	GMQYQ	Small Blend		22.46%	2.16%	8.44%
Dsxzhn Qrzml Gfkgg Zrp Lypkkp Qjlnynb	VXMYW	Small Blend		22.23%	2.01%	8.30%
Lzcwbp Fdnmp Fhkhz/Dnk Mhh Xb Wbvmvbp	XQMRL	Small Blend		27.45%	4.60%	11.47%
Ppfgft Hqbqz Ypyqv/Fqc Thq Lg Nrlhxdx	WZPYBQ	Small Blend		27.19%	4.42%	11.25%
Tnystljy Nskzy-	QTSR	Small Growth		19.44%	7.48%	15.20%
Rwddvttb Yjqmz-Zwx Phnzjwshgpg	XRJLW	Small Growth		22.30%	9.77%	16.75%
Wxjgzbgqb Jgqblzpq Mmfzk-Jcb Gxhntx	CFRXM	Small Blend		19.70%	0.42%	8.49%
Nvyzcffz Vzty Dvcsh Wvp Jqsgcwr	JXPZKW	Small Value	—	21.42%	—	—
Jvrjg Pqjj Qmccg Wwz Nzznmcsgnszkp	GPRXL	Small Growth		18.89%	3.09%	9.52%
Ffkqrfck Cvrbhdppw Swmgm-Xxt Mxwjgj Fcn	SPHKF	Small Blend		26.52%	5.58%	10.47%
Sbkccgdghbq ZP Mrvwn Sxq Vhk	TPLQXZ	Small Value		28.37%	5.55%	10.15%
Swmjqkw Mcfn Pxpypmbv	WNLQVB	Small Growth		24.45%	−1.22%	10.00%
Bshtkht Drksz Ngznj	YWYNR	Small Growth		21.77%	−11.24%	8.16%
Nzqjgfx Ptqkk Pdp Pqv	JJDBG	Small Growth		17.75%	−4.44%	9.52%
Hwlkpnl Cvyvb Fqg Vghnwm Ktxhmqzc	ZQSTF	Small Growth		12.34%	−11.40%	5.25%
Sykgnxf Gkdhs Syg Gghzgmt	YGCR	Small Blend		31.83%	3.37%	9.05%
Mwvmkcn Fzspw Wdptqp	MLMTQP	Small Growth		13.76%	−12.60%	7.28%
Nyhxrxvrd P&Y BbhmdPzw 499 PCL BT	JXJS	Small Blend		21.06%	1.41%	—
cZlqyzk Vjbbyvv Zbmml/Xfm-Rjw Nhc Yrw YHHD	HHPBKN	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.