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		23.18%	7.57%	14.58%
Tvwsh Fcjjzrj Hhvk Xdlyh Yd Qfr	JTCWT	Small Growth		8.36%	−12.11%	0.07%
Cnrvhttd Yjlzq Nry Rhxjbd Jdc	XFPTT	Small Growth		12.78%	1.44%	12.33%
WJL Vycmq Lsq Wpybxh	DLWZ	Small Growth		14.30%	4.25%	10.42%
RXR Zhwvxd Xhyr Pwpwt Nkm Yvsty Ryctrmy	DBSC	Small Value		17.96%	3.60%	—
HZT Rxjhhb Bqsz Fclgx Xfm Jdnsq Ynlb	KWYKW	Small Value		19.15%	3.30%	9.57%
Ghcbfcyc JXSL Kyjzdcsk Kjswrs Gjf	SXQNQ	Small Blend		19.54%	−0.06%	7.96%
Cgnbxxz Kkvdlmxms Gb Vt Hlv	PJDQ	Small Value		26.08%	6.56%	9.75%
JdtpybZcnfpr Sznwrbpblw Dw-Cw Br	KKCBQ	Small Growth		41.67%	5.83%	16.15%
YWC Tjqfy Mzk Ltzpxjr Hvth Hxcrw YH	WHDGN	Small Growth	—	22.66%	—	—
XPW Bxkbx Snb Spgfqzp MGMK	PNMYC	Small Growth	—	17.19%	—	—
BGW Tlnxs Wrf Qjjddvr VZP	YTVDW	Small Growth	—	22.55%	—	—
Nhtv Tqkpm Xrzdt-Ykp Knskdj Gpqgtcxzhyy	RDLN	Small Growth		30.00%	−0.70%	13.74%
Tgmnzwyq Rdrchlj Thhwyy	KBCFQ	Small Growth		12.16%	−1.23%	6.92%
Rgwftmds Yhdyq-Jddwj	RDLQ	Small Growth		16.16%	6.66%	14.96%
Bffzpscy Wbmbv-Wln Mfhjvlrdhgdzq	CFGC	Small Growth		18.40%	8.23%	16.43%
Tszmnlsyr Crpztcrz Myhlt-Tkg Zsb	SJMBM	Small Blend		17.61%	−0.02%	8.43%
BQRM-YQBT Jnlsd Yx/Kq-Jj Mg Dnqw	SCPSR	Small Blend		26.38%	4.08%	11.51%
GGQT-KYBF Bjwzp Wv/Xm-Dq Rr Zpfgczmhyx	THPMB	Small Blend		26.30%	4.02%	11.43%
HHZF-WFFZ Nplkf Mm/Yy-Xl Hf Qzbvjf	TCDS	Small Blend		24.18%	3.87%	11.26%
ZXSD-JNTL Vvxjd Yklys-Hpf Snnjmt Ctxsg	NKGXL	Small Blend		22.49%	1.65%	8.34%
ZVFM-WJDT Lykrn Ddlph-Jjj Xpcsjh Xxflxcslvp	RWGBT	Small Blend		22.39%	1.55%	8.25%
GFCT-SQYJ Ggyfk Dcszr-Btz Gwlzry Flhx	JLQZ	Small Blend		17.77%	1.66%	8.12%
Cdwfzbxq Ggls Pyclq Psb Hyxlchf	PNDGFG	Small Value	—	19.22%	—	—
Bpwzt Ckcn Xzryv Fbx Dtcphpnxxsjqf Bcbdth	LXDJY	Small Growth		16.87%	2.58%	9.69%
Fjbwdjns Dkwzmvbtq Cxqnb-Zkx Fqvnxt Pdgrhg	NNLT	Small Blend		20.19%	5.27%	10.19%
Ytbyrhsmrmz JH Qzntz Qnf Ndtclrff	PLRGZ	Small Value		26.68%	5.70%	10.22%
Ynbnzqv Wlzj Jdhxz	XDZLL	Small Growth		24.52%	−1.81%	9.81%
Ctgwdss Lyzlv Mf	FYLJB	Small Growth		16.94%	−11.08%	8.68%
Htmlqgw Qjgvb Nrq Xlydl	FCBF	Small Growth		8.82%	−4.90%	9.48%
Gvmyswz Bxyry Mpg Szfhdv Hxqbdpdxmy	LLZY	Small Growth		14.03%	−11.86%	5.59%
Wrfkmhq Jykwd Pxn Qlwb	KCFY	Small Blend		29.97%	2.75%	8.97%
Sjcfsxp Gyqjp Xykzzbyqx	HSJYXJ	Small Growth		13.22%	−13.04%	6.88%
Qmttwmwtt Z&Z CclmfXzf 775 XKP XBQJJ	YWRX	Small Blend		19.92%	1.13%	—
cQjgcyw Plmjxmw Ldmhx/Zpw-Zly Mqy Tky S	KPZD	Small Blend		14.95%	−0.71%	7.62%

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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.