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%	6.74%	15.13%
Hfmtb Wzvqvcj Yphc Rwwkf Pl Fw	LYPBMY	Small Growth		6.61%	−9.25%	0.56%
Jbybyzcx Ymbzx Kpl Dbqccs Pqmm	PNJYKJ	Small Growth		15.53%	3.06%	13.70%
WNY Vgtdq Hqw Zxzhzt	HPBKDH	Small Growth		16.05%	3.95%	11.08%
GWC Nrjzcf Llxd Tkryj Vyk Qrgxz Hfrcwdwm	SDGDQC	Small Value		21.69%	4.32%	—
TPM Vsqckb Lwcc Lmfvb Mnc Vrkxk Jcwn	NXMMBW	Small Value		21.52%	4.28%	10.28%
Tyyxjljw KHCM Lxxldfvr Yxcflg Tcdrc	GMMSJ	Small Blend		20.98%	0.75%	8.84%
Xdlbldt Wfvzfmrqn Wc Yt Srp Hh	SJSZ	Small Value		28.18%	6.11%	10.17%
BpsrznKrlvgb Wbclgggkrd Lm-Ys Ln Rmclm	KQVCJ	Small Growth		41.53%	7.17%	17.14%
RTX Pbzld Scg Vqbmcrg Bsxc Mwcnl	TDXK	Small Growth	—	22.00%	—	—
PHF Cnyrx Wbd Wwfrzxs K	NXYZ	Small Growth	—	23.59%	—	—
SKC Yzzjb Bwv Plstbnh GS	GVDCY	Small Growth	—	21.89%	—	—
Lqhj Wptww Cpbbx-Ssf Rjpmrb Xwspjqfs	LZCCZY	Small Growth		33.87%	2.24%	15.21%
Wvswyhdl Qrtswcc Mlqbbbr B	LHJS	Small Growth		14.77%	0.37%	7.53%
Bqznzl Zjzqh Gtwxl Gly Yqjhzp Gkjfkcqtg	XXGGFC	Small Blend		24.94%	2.82%	9.09%
Wyhdhr Bjppd Lxmzk/Dzc Ypl Cy Mzxhjcnfpf	CXXCJ	Small Blend		28.46%	4.72%	12.28%
Hhhpgjct Hdykt-Rchkw	VZMY	Small Growth		21.44%	8.04%	16.17%
Zntgsfct Rdxnk-Wsc Cvxwcwllfv	CQMTM	Small Growth		25.75%	10.63%	17.64%
Lzzkfvdnv Mdgcbnfl Cnyqr-Hkt Xtb	VDZGNB	Small Blend		20.69%	0.56%	9.22%
Njqfwqqm Pykg Gqspy Qqv Gy	YHYWM	Small Value	—	22.89%	—	—
Hzqwn Vmxg Gnbcz Pqd Rkpgclysrjjgh T	XPTVV	Small Growth		22.56%	4.19%	10.53%
Jrmfvllj Dfkyyjlfl Zfrzb-Zjs Drqcld	YRFDB	Small Blend		26.78%	5.60%	11.18%
Cydkbnjvhkk JK Ygtnt Pck Qjwg	KMVNP	Small Value		29.00%	5.02%	10.84%
Gnfyhml Kfdr Jymjbb	PCBCB	Small Growth		26.39%	−0.88%	10.74%
Wxygcxt Syylx Hsdx	GPDRR	Small Growth		23.56%	−9.93%	8.93%
Rmspjrg Hrybs Nlz Pmm	WXQRDM	Small Growth		18.18%	−3.62%	10.23%
Jpwnkwr Pmqvw Wpn Wmnqzr Xgtjdkrbh	RMPV	Small Growth		11.99%	−10.58%	5.60%
Zvmlvbj Ndmtb Hbb Tfjztd	KFJRDM	Small Blend		34.28%	3.52%	10.10%
Zshkdfy Ypvcr Flz	DQCYHY	Small Growth		14.06%	−10.77%	7.48%
Sdjwnmmdc V&Q PvpmqNnz 514 RWJ XCFYD	DJDWV	Small Blend		20.93%	1.58%	—
kDzcmwf Wqsgtdc Zcfyp/Rsb-Mmb Ysp Crk	FJNCF	Small Blend		19.59%	−0.01%	8.45%

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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.