Top 5 Small Cap Mutual Funds - Best of Funds

Small-cap funds are the preferred choice for investors with an appetite for risk and the ability to take up short term positions. Over time it has been observed that smaller firms reinvest most of their profits in a systematic manner. Thus, shareholders are assured of better performance and higher profits over time. Small cap funds also enjoy high levels of demand when markets are booming, which leads to significant increases in their prices. Investors looking for better diversification could also consider adding some small cap flavor to their portfolios.

Below we will share with you 5 top rated small-cap mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all small-cap funds, then click here.

AllianceBernstein Small Cap Growth A (QUASX) invests heavily in equity securities of small-cap companies with market capitalizations of less than $10 million. At any given time the fund invests in between 95 to 125 companies. This small-cap mutual fund has a ten year annualized return of 5.58%.

The small-cap mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.60% compared to a category average of 1.52%.

T. Rowe Price Diversified Small Cap Growth (PRDSX) seeks long-term capital growth. The majority of the fund's assets are invested in small companies which are included in the MSCI US Small-Cap Growth Index. The fund's top 25 holdings do not represent a significant share of total assets. This small-cap mutual fund returned 43.65% over the last one year period.

The fund manager is Sudhir Nanda and he has managed this small-cap fund since 2006.

Federated MDT Small Cap Growth A (QASGX) invests a large share of its assets in domestic small cap companies. The fund focuses on acquiring common stock and invests in firms which are identical to those which are part of the Russell 2000 growth index. This small-cap mutual fund has a five year annualized return of 2.27%.

As of March 2011, this small-cap mutual fund held 150 issues, with 2.00% of its total assets invested in TIBCO Software, Inc.

Putnam Small Cap Growth A (PNSAX) seeks long-term capital appreciation by investing in small-cap companies. The fund focuses on acquiring common stocks of domestic companies with an emphasis on growth stocks. This small-cap mutual fund returned 36.22% over the last one year period

The small-cap mutual fund has a minimum initial investment of $500 and an expense ratio of 1.39% compared to a category average of 1.52%.

Turner Small Cap Growth (TSCEX) invests the majority of its assets in equity securities of domestic small-cap companies. The fund focuses on acquiring common stocks and investing in companies which have widely diversified operations. It tries to match sector concentrations as represented by the 200 Growth index. It is a no-load fund.

This small-cap mutual fund has a three year annualized return of 7.28%.

To view the Zacks Rank and past performance of all small-cap mutual funds, then click here.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds/mutualfunds/