Best Small Cap Mutual Funds


A small cap stock is, broadly speaking a company with a market capitalization of less than $800 million and a small cap mutual fund has a primary focus of investing in small cap stocks. Anyone with a decent mixture of small to mid-cap stocks will tend to end up with better returns than a portfolio with a majority of large cap stocks. Small companies tend to outperform on the stock market over a 3-5 year period and if you can catch a small cap in its initial cycle you can ride the crest of the wave.

The following stocks are well performing small cap stocks with the following criteria. Each has a minimum investment of $3,000, a 5 star rating, an expense ratio less than 1.59%, and a yearly return of 16.7%.

Buffalo Mutual funds was initiated in 1998 and is currently managing $2.2 billion in assets. It has been a very reliable performer for the last several years with a return at 28% and it sits squarely at the top of its category in the 1-year return. Buffalo has as it’s holdings ITT Educational, one of the top tech schools in the world, Fidelity Institutional MM Fds Government I, WMS Industries and Panera Bread Company Inc A.

Wasatch Small Cap Growth has been around since 1986 with the same fund manager. It has $722 million under its management and has a 29.6% return, moving its rank up to 3 in the small growth category based solely on its one-year return. Wasatch has holdings in O’Reilly Automotive Inc, Resources Connection Inc., and HDFC Bank ADS.

Baron Growth is a small growth fund that opened its doors for business in 1994 and it’s current manager came on board just one year later. With $4.9 billion in assets under it’s control it’s a power on the mutual fund scene. Baron is a no load fund with an initial investment of just $2,000. This fund took some damage in 2008 but has pulled back well and it’s YTD is 18.77%, above average for the category. Baron has holdings in DeVry Inc., another top technical school, Strayer Education Inc., Edwards Lifesciences Corporation, and several other education and tech stocks.

Small cap stocks serve to balance a profile well and can be used liberally. Since most of the initial investment requirements are very low it is easy to get into a small cap and spreading them around can greatly increase your bottom line.

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