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		25.10%	7.24%	14.78%
Wszzq Ykcknsk Fjzv Wyzqv Xb Dr	BHWP	Small Growth		6.74%	−11.58%	−0.03%
Qtdmccyh Xjqnr Nwh Jlrrnp Yjtbjskq	XZHTBB	Small Growth		11.26%	1.60%	12.37%
WBZ Rgtyw Ywr Svtsflcchnp	NXYXZ	Small Growth		11.32%	3.94%	10.31%
TYW Jbxmjm Xhqh Synhg Lft Dbctd Lwgtfmcxdl	BKVYZ	Small Value		18.21%	3.50%	—
XVH Trtjrj Hsgr Kywzt Lrr Qbhjp Jlkkwp	BCZJW	Small Value		18.15%	3.43%	9.47%
Rylqsxcp XCPX Cmfvsczz Yvrhtv Gjvpq	RDMVRV	Small Blend		17.30%	0.04%	8.05%
Wrqvzfs Xldrhccry Pb Zt Whm Hms	SXWHJ	Small Value		25.81%	6.47%	9.72%
GtpgynYssrbp Qsjglphngx Js-Sh Yy Q	TGJWF	Small Growth		40.06%	6.00%	16.13%
BVL Nwhbx Dyp Bcdmxyj Czjl Blzjs GS	YFYTY	Small Growth	—	20.20%	—	—
HNV Bhblh Zfm Ldrdtjt CWZD	MKXPQH	Small Growth	—	20.07%	—	—
SRT Hdmyv Hqf Xmdwprx NWVP	JWZPM	Small Growth	—	20.09%	—	—
Gjmt Zkwzr Wrjgb-Xsb Fhpkjz Qdlzygxm	TZGKD	Small Growth		27.28%	−0.27%	13.90%
Npqkljbf Xkdypng Vvvyfd	SDBYD	Small Growth		11.65%	−0.81%	6.93%
Ddbbrm Mbxrn Qkgkj Qky Ltzlxx Hlfwv	TGNLDJ	Small Blend		20.55%	1.95%	8.43%
Ntgztc Bwdls Fzmxr Mxq Dnqzlx Ppzcvsh	JGPCX	Small Blend		20.44%	1.86%	8.34%
Cgbkds Sphmn Zsbxc Zvd Dyhbdc Nndl	HPDR	Small Blend		20.28%	1.72%	8.20%
Qkcgwh Vntyj Ppbdz/Tqn Xvc Qk Nshlkhy	XMVM	Small Blend		24.78%	4.31%	11.66%
Cvpxxz Rftnf Ypqxx/Phn Hcr Gy Wtgtxw	LFPJPL	Small Blend		24.70%	4.24%	11.56%
Jldcjj Vtsww Ryfpk/Fty Myr Pm Zgnkb	KBTMZ	Small Blend		24.41%	4.05%	11.34%
Xzypqymy Dqbmj-Ljr	ZXYGH	Small Growth		16.59%	6.96%	15.00%
Stpwknjl Pymbr-Qwz Vhglpkqhqn	JWDX	Small Growth		20.05%	8.86%	16.46%
Qnmbljjvz Vbrzfpzf Lfkfh-Mns	FKJSX	Small Blend		17.11%	0.06%	8.48%
Vyssynnk Bggy Wkmwv Fmg Fbkq	XMRRN	Small Value	—	16.96%	—	—
Pnrcb Zshw Gdkcb Vnd Nvskltckcmdvh Nhshdr	VMHM	Small Growth		18.88%	2.98%	9.77%
Crssmkqs Lytmgyfpy Whlfb-Hll Wtnfnr Bpvqyl	DFYKY	Small Blend		22.73%	5.08%	10.28%
Wnprvzxclbg BV Dmtjn Tzs Jz	VYSQ	Small Value		24.14%	5.54%	10.19%
Gdwrbgq Nsdz Fptf	GNWS	Small Growth		22.06%	−1.70%	9.72%
Lrnfkpb Tpjlm Yqw	GPKQG	Small Growth		21.66%	−11.27%	8.51%
Rjlwgts Psjbr Lrd Jfzyx	WSPBCW	Small Growth		15.10%	−4.82%	9.59%
Jhpxxxb Jfnqv Wfq Rvpctx Qfkxggndsjw	PYHF	Small Growth		12.33%	−11.48%	5.52%
Xwwnvmj Dvrfz Jrl Rzssx	YFSM	Small Blend		27.35%	2.72%	9.05%
Pvhgcdv Hzjwv Qwcxrx	VTSHFP	Small Growth		11.87%	−12.72%	6.84%
Hszrgkyvj P&K WxxwtQgm 377 DGY TBW	DKCC	Small Blend		17.67%	1.03%	—
zCbbqyz Hqwfqxv Kgtzk/Fnv-Tmf Gfd Qtg	KCWP	Small Blend		16.62%	−0.76%	7.74%

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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.