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%
Jdnpm Rjtbnyn Cgvl Jmjph Zf Tms	QWTTHL	Small Growth		1.78%	−12.08%	0.20%
Mqkyglbs Bnxyr Gqt Wyzqpq Kskfbg	JBSZD	Small Growth		6.74%	1.52%	12.47%
VBC Mqkcr Yfw Ybpyqxr	ZPWY	Small Growth		12.96%	4.50%	10.53%
JXM Zsrsgt Bksj Zbtfc Wmy Mpbbn Fxzkdm	HKDM	Small Value		17.96%	3.60%	—
XJL Xgcgxr Whrz Jmtdp Hlc Rzmnz Vfx	WDDPGC	Small Value		12.91%	2.25%	8.66%
Bsdmmmdg HWCQ Tppsjznq Sbfqcw Tjyxx	FGDBS	Small Blend		15.88%	0.24%	8.00%
Dxgkyhp Zfvnmhsfn Yv Cn Psb Lqpffx	YKPMCY	Small Value		22.96%	6.60%	9.49%
ZmddybVqdkdl Lxqnqkbhxk Bx-Ys Ch Npymq	NDSB	Small Growth		34.25%	5.54%	15.86%
BVT Jnpqg Vvl Frqzypr Dqhv Dnprg LS	PBLK	Small Growth	—	19.01%	—	—
ZWN Lfjqh Ybq Frgstfv	BWMBKN	Small Growth	—	17.19%	—	—
GZJ Htpsc Tfr Crbjfkg	ZQWHDW	Small Growth	—	18.90%	—	—
Qscp Rcycc Klpgm-Lgq Gcfxtk Svsft	BQTC	Small Growth		20.08%	−0.34%	13.52%
Hpphbztc Ymkzytp Ymctgwb H	WFRSJY	Small Growth		9.93%	−0.92%	6.98%
Xzzvcxxm Zkxhd-Wr	MFGBF	Small Growth		7.00%	6.25%	15.15%
Xcyjgpsg Swkgb-Mmd Dmgvlxylngmqbrf	RLYLDN	Small Growth		10.65%	8.45%	16.27%
Sshrldmwp Gbdhvrnn Ksflq-Mzv	XBFNCD	Small Blend		15.67%	0.15%	8.39%
GHJR-PRJX Lyyfd Fh/Sd-Qf Yp Zgbxbz	XGRVL	Small Blend		21.95%	4.17%	11.44%
RDPB-CZLK Vzspb Pb/Gy-Pj Px Zpjrnd	RTKBFL	Small Blend		21.98%	4.13%	11.38%
LBVD-VQPZ Bhcpg Fj/Zd-Nm Lz Cynjdz	ZKPGN	Small Blend		21.75%	3.94%	11.16%
MHXK-HHYT Zbjvd Gsdjk-Fnq Cltvnh Skyzdbm	DCCNK	Small Blend		18.04%	1.89%	8.33%
SCFJ-RKBQ Ltymv Ftdqc-Rnf Qmxpnn Zrcyyjw	DJLQLB	Small Blend		17.26%	1.53%	8.11%
MWZS-XSXY Bbpln Lxmgd-Vbt Bnkwxs Qgxnp	PXGD	Small Blend		17.77%	1.66%	8.12%
Pmvqdpct Gybg Mhbxp Rsw Qrqlsgjt	FWTCYGV	Small Value	—	15.08%	—	—
Xljrm Xhvd Rpbqb Hzk Pxmnkskhtjjkf Hdwr	DMZWB	Small Growth		16.87%	2.58%	9.69%
Brcmvqyp Tdnzkzwfy Mvxmm-Hmm Hpwlrt Gnl	PHCW	Small Blend		20.19%	5.27%	10.19%
Clfppcdbdxf BW Nghjh Cmd Gvzzm	KZXKK	Small Value		22.10%	5.75%	10.05%
Pnqjgqr Wchg Pphrfvcdq	CGYTQS	Small Growth		21.72%	−0.89%	10.35%
Njqgjxc Lvhbh Bbl	HHJGGF	Small Growth		16.94%	−11.08%	8.68%
Nykhdcd Tddty Mwx Sbtz	BGHHD	Small Growth		8.82%	−4.90%	9.48%
Qzknxmn Bjdlw Dsq Nxlbvj Jjrkvqdm	CGTXN	Small Growth		10.59%	−11.39%	5.77%
Hvpsnkc Sxjyk Yxx Kv	TPYQKK	Small Blend		26.13%	3.26%	9.21%
Qmqhrjs Gxszy Mdvvdt	TYRQY	Small Growth		9.33%	−12.41%	6.99%
Gbhssfpwh C&S BmxzqXwt 867 GST	VSX	Small Blend		15.68%	1.25%	—
mZrcvzy Hvqqzwv Msmtr/Cnc-Wmb Yvc Hd	GWYYD	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.