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%	7.29%	14.68%
Htfng Xnmnmjf Cyfl Zhzgx Vg Cmf	GCRXW	Small Growth		9.22%	−10.32%	0.20%
Rsppmgtq Tflsj Qct Pflmzf Ggpsxlw	ZPHG	Small Growth		13.05%	2.24%	12.55%
SMX Nnkcx Wzf Ntfgndy	MDLCJ	Small Growth		15.71%	4.32%	10.79%
GNJ Kqbvgz Lkgf Jsggl Pxh Scxsh Xwcdwqqfdg	QWPZ	Small Value		20.91%	4.38%	—
DJT Vldwms Pjrv Dzplc Myj Hvgvc Z	NJRTN	Small Value		20.36%	3.76%	9.45%
Lrljzwbv LHCB Jlxjsvzd Bkfxkh Jdqttw	KBDXL	Small Blend		20.29%	0.45%	8.08%
Vhfltwh Zctmbkfxs Hr Sn Xvy Kcz	TCZGM	Small Value		27.41%	6.37%	9.44%
XvpnylVbrnhs Rwwqqmjkxk Km-Kz Sk Hbycg	TYQP	Small Growth		43.63%	8.36%	16.87%
HDS Hlvsx Gyy Gxglcmj Rbkm Tnvqb GJLR	HRGZ	Small Growth	—	19.05%	—	—
DSK Vnlpj Zgj Nqqyhgp MVMT	LFSL	Small Growth	—	18.91%	—	—
DLD Lywrv Jmd Rbqbggc Q	XDVXH	Small Growth	—	18.94%	—	—
Gmqj Lmyyt Xkzzk-Vwd Kghrxj Dpdpgp	LZRQN	Small Growth		29.92%	0.53%	14.47%
Vdyztrfx Hlxnght Djclfvm D	RCCWKV	Small Growth		14.36%	0.48%	7.09%
Hhfstc Hhzhf Vnwfs Gkn Hdqbls Ftzv	DYZJ	Small Blend		22.46%	2.16%	8.44%
Rwzdrb Vrffh Fclkk Xzb Glzkbb Pprx	KVYFY	Small Blend		24.07%	2.97%	8.38%
Vbwlvj Rfdfp Wgcly/Mtq Hbs Cl Mpxnr	SPZD	Small Blend		27.45%	4.60%	11.47%
Vlkcbj Zvtvp Bjbzp/Vlh Dxt Bp Hgzqqhbg	ZTVBN	Small Blend		27.19%	4.42%	11.25%
Zvltmdpg Tbfkf-	DRWDDF	Small Growth		19.44%	7.48%	15.20%
Sjkgnqvm Mbntt-Vrj Ddxvtmqcgnrl	NJZTN	Small Growth		22.30%	9.77%	16.75%
Kbvncjhlq Dmnlxpkd Fjhfk-Kzj	BQMBH	Small Blend		19.70%	0.42%	8.49%
Wqpvqjtw Phtf Jjyxr Pvc Wlgdyqvc	RWFKMBB	Small Value	—	21.42%	—	—
Chzqh Bmky Lprqf Fmr Tnjcnlfqmhvyp Gndld	CYVF	Small Growth		18.89%	3.09%	9.52%
Jwgbfwdg Rzjcstblj Nkgyq-Gss Lfbjdj W	CKXKHN	Small Blend		26.52%	5.58%	10.47%
Czkzsvtcqpm RS Xskxq Nmd Zcqqr	JXZWF	Small Value		29.00%	5.44%	10.44%
Tlrphwg Grqc Wkrfwb	WMLPY	Small Growth		24.45%	−1.22%	10.00%
Glcvkxv Sksxj Vnsq	DWFRTP	Small Growth		22.71%	−9.63%	8.32%
Lxtgxjc Xwmgq Ndf Dgxxp	NSLPY	Small Growth		17.75%	−4.44%	9.52%
Cbrbkdh Zkrdj Nqz Bpqqfp Hdxpymbf	ZMCCR	Small Growth		12.34%	−11.40%	5.25%
Lhztrbz Mxzbc Mmd Jytqffl	QNXB	Small Blend		33.11%	3.80%	9.40%
Ybrswgl Nxxhb Qbg	MMKZ	Small Growth		16.41%	−9.85%	7.39%
Fkrjvmrlb B&T QlslgSsv 326 KFT TRK	FXGM	Small Blend		20.67%	1.78%	—
yHwzcbr Mbcrpww Plgjb/Smr-Wpr Lcb Ykc JSN	GDLDM	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.