The Best Small-Cap Funds
These small-company-focused mutual funds and ETFs all earn Morningstar Analyst Ratings of Gold.
Investors gravitate to small companies for many reasons. Some want a small dose of small companies in their portfolios to round out their exposure to the overall stock market. Others may want to tilt their portfolios toward small caps after a period of large-cap outperformance, such as we've seen during the past several years. Still others may want to participate in what has been called the "small-cap effect," or the theory that smaller companies have greater growth opportunities than larger companies and, as a result, have greater total return potential over time.
Before adding a small-cap fund to your portfolio mix, though, double check that you don’t already have plenty of exposure to small-company stocks through your core equity fund holdings; Morningstar’s Instant X-Ray feature can help you determine your portfolio’s current small-cap stake. While there’s no “right” allocation to small-company stocks, Morningstar’s Lifetime Allocation Indexes (which you can use to benchmark your asset allocation) suggest up to an 11% position in domestic small caps, depending on your life stage.
Susan Dziubinski does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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