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Small Growth Packs Risk After Rally

Rising small-cap Internet stocks have swelled the average valuations of small-cap growth portfolios.

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This article was published in the October issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestor here

The small-cap growth category has had a fantastic run so far in 2013. Averaging a 30.4% return through Sept. 30, it is the top-performing diversified-domestic category by a mile. In second place, the small-blend category is trailing well behind with a 23.8% return. (Meanwhile, large-cap funds are averaging around 20.0%.) Fueling these returns are high-flying small-cap technology names such as Angie's List (ANGI) (up 87.6%) and Zillow (Z) (up 203.8%).

Laura Lallos does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.