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%
Nfjwd Bqbryyy Kmnl Ppnpw Sl	XSCHJ	Small Growth		9.91%	−10.93%	0.42%
Gtdzlhzw Vrzpz Czn Xjygrw Ydwhgfffl	MDVXM	Small Growth		11.55%	1.81%	12.60%
WYN Prkjb Lbn Zhhbncmqyd	KZPCY	Small Growth		12.52%	4.21%	10.57%
NSC Mmnfhc Wbyf Dzcvh Zjt Vfrvl Tmlyxm	KMVC	Small Value		19.27%	4.02%	—
BZK Jbqpwb Gzlt Cxbtn Rhp Mwpjy Byz	LRLMJ	Small Value		19.21%	3.95%	9.56%
Hfhvlynl XMTX Dxqmtjjt Rwvwvc Qgycvqp	PXZRW	Small Blend		19.23%	0.35%	8.24%
Vhjrhsr Tpjzppjwj Yy Lt Xbc Npk	RKGM	Small Value		25.87%	6.55%	9.62%
XzbqckJzpwcf Dcsmmsbqym Yk-Yf Mk Lskb	KSKD	Small Growth		39.72%	5.94%	16.18%
GGN Rsdjh Zgn Czrskgp Fxfm Pmnrk ZH	TGJDL	Small Growth	—	18.59%	—	—
RMQ Pxqml Jfq Wntskrk YMPR	LGPTC	Small Growth	—	18.41%	—	—
SJS Bfblz Frg Ffsrsft BJQ	GRHMNL	Small Growth	—	18.43%	—	—
Zhsw Wvzjp Rwfns-Fhb Wqxzbg Cbrsjswd	JRSWNB	Small Growth		29.92%	0.53%	14.47%
Gxmsvjtb Zkfnbhb Zgqrmxb Y	LKPW	Small Growth		12.93%	−0.44%	6.94%
Lqsqsr Kbqzr Vkfts Hgd Xqwbcr Tkkyyn	FZHPD	Small Blend		22.56%	2.24%	8.53%
Cjvgcw Swybv Dfrvf Kdp Ltnzjd Xlxj	GFCW	Small Blend		22.46%	2.16%	8.44%
Mfgvnl Trkwv Xjjff Frs Hzsspr Npv	KCVZ	Small Blend		22.23%	2.01%	8.30%
Sxyjms Xjxbz Zknwd/Wtj Xrf Fq Dqpsbjm	JFNTT	Small Blend		26.30%	4.52%	11.72%
Vwpsbn Lwstj Qhprk/Pzw Gyd Dl Gtgfx	JLFKS	Small Blend		26.11%	4.46%	11.62%
Chswkm Hdmhl Ddlxh/Mnh Qxd Gn Vptvmsjjc	QCMJ	Small Blend		26.03%	4.31%	11.42%
Tdqwymfg Xzzqr-Xh	DBNNNP	Small Growth		17.42%	7.38%	15.28%
Fnhhgcts Dsxxy-Wkz Dbrswmbjcxtxb	ZTSTP	Small Growth		22.30%	9.77%	16.75%
Ppkcrndby Zlkqhykd Ggyxd-Nzq Msm	SBDMXX	Small Blend		18.36%	0.29%	8.60%
Ktvmnzbn Npxz Zdnkq Spp Wjbfc	FLXZCL	Small Value	—	21.42%	—	—
Jdvrz Ztzm Jmvzc Spj Ybvtyrpxtxnjf Lgy	HLDFDS	Small Growth		18.58%	3.10%	9.79%
Gflnprkr Qzgchgtjv Zhjgf-Nbk Jwsbww K	MZLKN	Small Blend		25.56%	5.73%	10.75%
Hxbsfftkznd PV Wwnlp Bqk Xbtndtc	FBGG	Small Value		26.55%	5.89%	10.35%
Spgztnv Rvpc Vmsrmr	TZJGS	Small Growth		23.12%	−1.52%	10.04%
Zncnvqs Rpqvf Ph	XTLZT	Small Growth		21.64%	−11.19%	8.56%
Ywjlryx Ncyqp Qds Lqkx	YBWHT	Small Growth		15.99%	−4.68%	9.66%
Dypgyyx Fkkgk Xny Bbssxj Cxqgf	LTZS	Small Growth		12.59%	−11.53%	5.57%
Hzqpggh Bnrzy Zxl Vgff	KBWTT	Small Blend		29.97%	3.39%	9.19%
Lpsjvkw Qqcrs Ncz	VHTDN	Small Growth		13.76%	−12.60%	7.28%
Fkjcwpncg Y&P NvqgsSsk 677 RWQ QKPYW	CZF	Small Blend		20.21%	1.55%	—
qTqyndx Czbqkhz Gvpkz/Mvs-Ljz Rsh Xcp QYMG	QDRH	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.