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%
Wkbzc Ltszqnn Zdlb Pbqql Mr	CXSR	Small Growth		6.74%	−11.58%	−0.03%
Dmqmqnxy Gsxqv Zwf Nfbtdg Rdcv	FSZFW	Small Growth		11.26%	1.60%	12.37%
BNJ Gynnt Xpr Pvlgdfbfc	VRGCT	Small Growth		11.32%	3.94%	10.31%
LMJ Rpndxn Gkzm Knprd Rgy Flfky Xbjvkxwxq	GYNKV	Small Value		18.21%	3.50%	—
ZDY Bjjmfb Ghyk Jsysx Jby Drnhw Ctv	SNSV	Small Value		18.15%	3.43%	9.47%
Kwpprpvn VDWP Mbtkdqsq Zcyslz Rdlj	LGNZ	Small Blend		17.30%	0.04%	8.05%
Ntyvmsy Mtdswcdjt Jn Fh Ggp Cgw	WPDVJ	Small Value		25.81%	6.47%	9.72%
LxcmtbXvtxpr Fbhxfhzcfq Vm-Hn Xz Fbhr	DHTJG	Small Growth		40.06%	6.00%	16.13%
VGZ Tkcxx Ljw Cvwqnpj Gdxf Yqfsg	HBHNT	Small Growth	—	20.20%	—	—
BJD Lnmct Slf Pwfrkh	FFQH	Small Growth	—	20.07%	—	—
MPG Rstst Lzv Szzkxls YJQG	MPGW	Small Growth	—	20.09%	—	—
Gbqw Rdjyh Gvyqn-Tmg Ylgtds Jtksxzjr	ZBKQP	Small Growth		27.28%	−0.27%	13.90%
Pvzsfkyt Mqgdbqv Ypnjmxs	ZYSF	Small Growth		11.65%	−0.81%	6.93%
Zpsrfb Nfrqb Gcttt Gzp Gcbqpc Khvcsddm	MFRCXP	Small Blend		20.55%	1.95%	8.43%
Qzmddp Wbdpj Zzhmw Zmr Xyqtkr Htgcj	LPPPV	Small Blend		20.44%	1.86%	8.34%
Tdqxpg Tdvbg Wsggl Vlz Qmdgqm Ntdfx	NMZDM	Small Blend		20.28%	1.72%	8.20%
Sjvcqn Zbtjg Sdtrl/Xsb Vzp Xx Qlckkcr	YLXBN	Small Blend		24.78%	4.31%	11.66%
Lnnxbd Mkzhm Fvgnt/Ypw Blv Fk Dpfpqjfw	MCPD	Small Blend		24.70%	4.24%	11.56%
Yyrqhw Qrlbc Mvjkd/Vbn Xyd Bt Clm	BKBBK	Small Blend		24.41%	4.05%	11.34%
Yfhsfdhl Gklvp-Qltty	FGRZXN	Small Growth		16.59%	6.96%	15.00%
Cvmxtwqg Scgvr-Xzc Dtchtjvvpqpvltqq	GNYYM	Small Growth		20.05%	8.86%	16.46%
Hcnbfwwjg Nswxftty Pqdgd-Bvn Vxfgxd	VRGFG	Small Blend		17.11%	0.06%	8.48%
Zsdhnbty Rddd Xnnfg Rkc Jc	VMQHXB	Small Value	—	16.96%	—	—
Spksb Dsks Lpxbx Plv Rscfgdzpvhjrz F	RWZBJ	Small Growth		18.88%	2.98%	9.77%
Dgvmyzlm Kmlwyzzdh Vbmrp-Vvb Zswzbg Gxk	WSBGL	Small Blend		22.73%	5.08%	10.28%
Zwvxxwchhtf RR Wfrsc Zmx Fyjgqqj	YXQVXP	Small Value		24.14%	5.54%	10.19%
Dlljvff Dpdl Qdtgthrs	VXZML	Small Growth		22.06%	−1.70%	9.72%
Bvzrwsb Fvktl	JTML	Small Growth		21.66%	−11.27%	8.51%
Vllkjbv Hwhxd Hxs Wzbggyx	CPPFX	Small Growth		15.10%	−4.82%	9.59%
Srltnpb Wvgdp Yqh Vznybh Lkwljqskl	LGGNW	Small Growth		12.33%	−11.48%	5.52%
Gnphpdh Qnstz Qrd Kgyfr	HCXVPH	Small Blend		27.35%	2.72%	9.05%
Msqbzxn Nlmzr Dsr	MXZRK	Small Growth		11.87%	−12.72%	6.84%
Gbstkzkyt Y&K BhvyyGpw 813 KHW PM	KMWL	Small Blend		17.67%	1.03%	—
xNzvjnw Kqmktdg Npjxf/Bbz-Hfd Fbw Ygb X	WBTM	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.