Small-cap growth funds are natural choices for investors with a high-risk appetite when capital appreciation over the long term takes precedence over dividend payouts. These funds focus on realizing an appreciable amount of capital growth by investing in stocks projected to rise in value over the long term.
Small-cap funds are also good choices for investors seeking diversification across different sectors and companies. These generally invest in companies having a market cap lower than $2 billion. The companies, smaller in size, offer growth potential, and their market capitalization may increase subsequently. Also, due to their lower international exposure, small-cap funds offer higher protection than their large- and mid-cap counterparts against any global downturn.
Below, we share with you three top-ranked small-cap growth mutual funds, namely AMG GW&K Small/Mid Cap Growth Fund ACWDX, T. Rowe Price QM U.S. Small-Cap Growth Equity Fund PRDSX and Putnam Small Cap Growth Fund PNSAX. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.
AMG GW&K Small/Mid Cap Growth Fund invests the majority of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of small-cap and mid-cap companies. ACWDX defines small and mid-cap companies as those within the range of the Russell 2500 Growth Index.
AMG GW&K Small/Mid Cap Growth Fund has a three-year annualized return of 9.2%. As of January 2023, ACWDX held 75 issues, with 2.5% of its assets invested in Atkore.
T. Rowe Price QM U.S. Small-Cap Growth Equity Fund invests the majority of its assets in common stocks of small-cap growth companies in the United States, and defines small-cap growth companies as those whose market capitalization, at the time of purchase, falls within the range of companies in the MSCI US Small Cap Growth Index.
T. Rowe Price QM U.S. Small-Cap Growth Equity Fund has three-year annualized returns of 6.2%. PRDSX has an expense ratio of 0.80% compared with the category average of 1.21%.
Putnam Small Cap Growth Fund invests the majority of its assets in common stocks of small American companies with high growth potential. For its investment purposes, PNSAX advisors define small-cap issuers as those that are at the time of purchase within the range of market-cap of the Russell 2000 Growth Index.
Putnam Small Cap Growth Fund has a three-year annualized return of 6.6%. William Monroe has been one of the fund managers of PNSAX since 2017.
To view the Zacks Rank and the past performance of all small-cap growth mutual funds, investors can click here to see the complete list of small-cap growth mutual funds.
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