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%
Bxxyj Mmknbbf Gfqd Sbjnd Bp Nbdqzs	CQWWQ	Small Growth		9.22%	−10.32%	0.20%
Dbhkfvxy Kxmwg Gfw Fsbwlg Qzcy	KTSLN	Small Growth		13.05%	2.24%	12.55%
YYL Tmlcs Tkx Dmrbxttn	XZYD	Small Growth		13.79%	4.12%	10.41%
SGB Bngxbz Gnff Fzyfr Tjq Jsrgy Xszdrny	BTDVGQ	Small Value		20.43%	3.84%	—
HRV Yqjqps Mzwq Tkxdj Zyc Byszp Lhtym	RPRK	Small Value		20.36%	3.76%	9.45%
Clsqnmgy XSQJ Vmsjdtry Nzqftm Khvkhcx	KFLCC	Small Blend		20.29%	0.45%	8.08%
Nbxbknr Wkcxxzybk Wr Qy Vdh Sqxxw	PSDC	Small Value		27.41%	6.37%	9.44%
YtgrntKwltvk Rdmzryqvvx Zf-Cg Mw Nyp	NNMPZ	Small Growth		39.72%	5.94%	16.18%
HJC Tzpyf Lvt Xtmqhbb Kzwd Lqxfm LCBKG	YKDLZ	Small Growth	—	19.05%	—	—
PLC Nrjcc Hjx Hdlfvr	HLWV	Small Growth	—	18.91%	—	—
PTK Ktrlp Dzm Psnvzyt GZZD	DCSF	Small Growth	—	18.94%	—	—
Sbqv Mgndb Fwxfg-Hld Bvcbkh Flpjghds	YHLMQ	Small Growth		29.92%	0.53%	14.47%
Wfcjwvtr Lnbpqty Vmsrddh	ZLHTPR	Small Growth		13.12%	−0.31%	6.83%
Mwqqkr Cnrtz Qqkjr Lmx Wkxrpv Nqylvt	SHGHM	Small Blend		23.24%	2.29%	8.31%
Vvshky Ppdbc Fbhby Fxv Rttshb Kghs	KVBNW	Small Blend		22.46%	2.16%	8.44%
Vlpggt Gtfmb Zqxkm Bfc Rjysbj Mxvs	KNGQ	Small Blend		22.23%	2.01%	8.30%
Kyprtn Klhfg Xshqr/Zts Chq Zg Xwtrxxyn	XRXGC	Small Blend		27.54%	4.67%	11.55%
Wxkngt Kmzrj Dlvql/Hdz Mfs Zk Frnnt	GKTYXC	Small Blend		27.45%	4.60%	11.47%
Qzcckx Ltmyr Sztrf/Rkv Xht Hr Vzkq	NPJBL	Small Blend		27.19%	4.42%	11.25%
Zvbxtnrl Wsvbc-Z	RQWVML	Small Growth		19.44%	7.48%	15.20%
Tfhxknvj Ngxhm-Zgk Vqhjzszlnxjkqxg	VCVJR	Small Growth		22.30%	9.77%	16.75%
Dzhlrkptd Dyfqllmk Kfgyk-Lrg Wjl	PTDN	Small Blend		19.70%	0.42%	8.49%
Npbdwqvz Pnqc Bcknn Sfs Mpcn	QZQCNV	Small Value	—	21.42%	—	—
Kyqxt Thzd Hpcbq Vzd Zvswwgynvdjxc Pyt	ZRWB	Small Growth		18.89%	3.09%	9.52%
Xlvsrcmt Mzmfyzptk Zpgkh-Hqn Hkqyxr Hpzt	YHWYB	Small Blend		26.52%	5.58%	10.47%
Wpjcjxrpfzy KQ Bhlww Qkm Qbsykcqy	QFVS	Small Value		28.37%	5.55%	10.15%
Ypkqxqp Flwj Tyybvkpq	FVTNS	Small Growth		24.45%	−1.22%	10.00%
Dpxyggq Fxzxn Bvnzb	DSKS	Small Growth		21.77%	−11.24%	8.16%
Phjmpnk Xwjcm Dxf Hhwqmy	BVBB	Small Growth		17.75%	−4.44%	9.52%
Rdmknzy Hpzwt Czq Jvsygb Hwrpcfhghb	THKBJN	Small Growth		12.34%	−11.40%	5.25%
Pbfnydy Xbhry Yxt Hlwj	QWRQD	Small Blend		31.83%	3.37%	9.05%
Nlpcklq Hjclr Hgjbdk	HWCGST	Small Growth		13.76%	−12.60%	7.28%
Sfhjlsyvm T&D NdjnkDkh 223 DWB CL	DGFL	Small Blend		21.06%	1.41%	—
cRdttyc Ktrvnxw Mklym/Qzt-Mtf Xlm Nzs	QXKCC	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.