Best small value mutual funds

Best small value mutual funds DEFAULT

The 25 Best Low-Fee Mutual Funds You Can Buy

The Kiplinger 25 list of our favorite no-load mutual funds dates back to 2004, and our coverage of mutual funds goes all the way back to the 1950s. We believe in holding funds rather than trading them, so we focus on promising mutual funds with solid long-term records – and managers with tenures to match.

The past year-plus has been a wild ride, both for markets overall and for the Kip 25 funds, and we've made a number of changes, including a very recent addition to our "specialized" funds. The period was marked by the end of the bear market and the beginning of a rocky, tech-driven recovery, punctuated by a shift toward small companies and economically sensitive sectors such as energy and financials after the election and the release of COVID-19 vaccines.

All told, however, we’re happy with our funds. Our diversified U.S. stock funds, on average, beat the S&P 500 index; our foreign stock funds trounced the MSCI EAFE index of stocks in foreign developed countries; and our bond funds, overall, delivered bigger gains than the Bloomberg Barclays U.S. Aggregate Bond index.

Here are our picks for the best 25 low-fee mutual funds: what makes them tick, and what kind of returns they've delivered.

Data is as of Sept. 28, unless otherwise noted. Three-, five- and 10-year returns are annualized. Yields on equity funds represent the trailing 12-month yield. Yields on balanced and bond funds are SEC yields, which reflect the interest earned after deducting fund expenses for the most recent 30-day period.

1 of 25

Dodge & Cox Stock

DODGX
  • Symbol:DODGX
  • 1-year return: 51.9%
  • 3-year return: 13.4%
  • 5-year return: 15.4%
  • 10-year return: 16.1%
  • Yield: 1.3%
  • Expense ratio: 0.52%

The focus: Reasonably priced shares in large and midsize companies.

The process: Eight managers select stocks to buy and hold for at least three to five years (but typically longer). They favor firms with steady cash flow and earnings growth.

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The track record: The fund’s 10-year annualized return of 16.1% beat 99% of all large value-oriented funds. After lagging their growth-focused counterparts for a decade, value-priced stocks are waking up.

The last word: This fund is a sturdy option for investors looking to balance FAANG-heavy portfolios. Wells Fargo (WFC), Charles Schwab (SCHW) and Capital One Financial (COF) are among the top holdings.

2 of 25

Mairs & Power Growth

MPGFX
  • Symbol:MPGFX
  • 1-year return: 34.8%
  • 3-year return: 16.0%
  • 5-year return: 15.1%
  • 10-year return: 16.1%
  • Yield: 0.7%
  • Expense ratio: 0.64%

The focus: Growing companies of all sizes trading at a reasonable price.

The process: The Saint Paul, Minn.-based managers like to know their companies well, so they invest a majority of the fund’s assets in firms based in the Upper Midwest. The portfolio has a hefty helping of healthcare stocks that's larger than similar funds, on average.

The track record: MPGFX's value tilt is part of the reason its 10-year annualized return, 16.1%, lagged the S&P 500's 16.5% total return over that time. But it's also part of why it has closed the performance gap of late. Also, the fund has beaten roughly two-thirds of its peers (funds that invest in firms with growth and value characteristics) over the same 10-year period. Last year, graphics chip maker Nvidia (NVDA) and Bio-Techne (TECH), which makes biotech research tools, were big gainers.

The last word: Mairs & Power Growth is quirky, but it offers diversification from tech-heavy growth funds.

3 of 25

Fidelity Blue Chip Growth

FBGRX
  • Symbol:FBGRX
  • 1-year return: 36.2%
  • 3-year return: 28.2%
  • 5-year return: 27.8%
  • 10-year return: 21.9%
  • Yield: 0.0%
  • Expense ratio: 0.79%

The focus: Fast-growing large firms.

The process: Sonu Kalra’s portfolio can be sorted into three buckets: firms with robust long-term growth (e-commerce companies, for example), companies in a cyclically driven growth phase (financials, say) and a smaller group he calls “self-help stories,” which are businesses with a new manager or product (think of a retailer, for instance, with a growth driver that’s underappreciated).

The track record: The fund’s 10-year 21.9% annualized return easily beat the S&P 500 and 96% of peers (large-company growth funds).

The last word: Except for the brief bear market in early 2020, Kalra has had a bull market behind him since he took over in 2009. But he beat the S&P 500 as manager of Fidelity OTC (FOCPX) between 2005 and mid-2009 – a period that included a bigger downturn.

4 of 25

Primecap Odyssey Growth

POGRX
  • Symbol:POGRX
  • 1-year return: 35.3%
  • 3-year return: 10.7%
  • 5-year return: 16.4%
  • 10-year return: 17.0%
  • Yield: 0.3%
  • Expense ratio: 0.65%

The focus: Fast-growing firms.

The process: Five managers divide the fund’s assets and run each share independently. Each manager looks for firms with long-term growth potential that the market has underestimated.

The track record: The fund’s five-year return lags the S&P 500, but its 10- and 15-year records handily beat the index.

The last word: Patient shareholders are being rewarded. The fund’s one-year reward is more than 3 percentage points better than the S&P 500 thanks to recent climbs by top holdings Morgan Stanley (MS) and Abiomed (ABMD).

5 of 25

T. Rowe Price Dividend Growth

PRDGX
  • Symbol:PRDGX
  • 1-year return: 28.3%
  • 3-year return: 15.7%
  • 5-year return: 15.5%
  • 10-year return: 15.7%
  • Yield: 0.9%
  • Expense ratio: 0.63%

The focus: Dividend stocks.

The process: Manager Tom Huber focuses on high-quality companies that throw off cash and have the capacity or willingness to raise payouts.

The track record: In its 21 years under Huber, the fund has returned roughly 500%, versus 340% for the S&P 500.

The last word: Stocks that lean defensive, such as McDonald’s (MCD) and discount retailer Ross Stores (ROST), suffered during the economic shutdown and still haven't bounced back as rapidly as the broader stock market. That partly explains why the fund’s one-year return lagged the index.

6 of 25

Vanguard Equity-Income

Composite image representing Vanguard's VEIPX fund
  • Symbol:VEIPX
  • 1-year return: 32.2%
  • 3-year return: 10.9%
  • 5-year return: 11.9%
  • 10-year return: 13.7%
  • Yield: 2.2%
  • Expense ratio: 0.28%

The focus: Dividend-paying companies.

The process: Wellington Management’s Michael Reckmeyer runs two-thirds of the fund’s assets, focusing on healthy firms with competitive ad­vantages that can sustain and increase dividend payouts. Last year, Reckmeyer added to the portfolio medical equipment firm Becton Dickinson (BDX) and financial powerhouse Morgan Stanley, among others, at bargain prices. Vanguard’s in-house quantitative stock-picking group manages the rest of the assets.

The track record: Equity-Income beat 77% of large value funds with its 10-year annualized return of 13.7%. The fund’s yield of 2.2% bests the S&P 500’s 1.3% yield.

The last word: “It has been an interesting year, but overall we’ve managed through the dislocation well,” says Reckmeyer. We agree.

7 of 25

DF Dent Midcap Growth

DFDMX
  • Symbol:DFDMX
  • 1-year return: 26.2%
  • 3-year return: 19.3%
  • 5-year return: 20.5%
  • 10-year return: 18.4%
  • Yield: 0.0%
  • Expense ratio: 0.98%

The focus: Growing midsize-company stocks.

The process: The fund’s managers favor “best in class” companies, defined as firms with a leading market share in their industry, strong growth potential, a history of good profitability, and executives who practice good governance and display personal humility and indomitable will. SBA Communications (SBAC) and Vulcan Materials (VMC) are among the top holdings.

The track record: The fund’s five-year annualized return of 20.5% beat its peers (midsize growth funds) and the Russell Mid Cap Growth Index. Meanwhile, its 10-year annual average return of 18.4% is better than 89% of peers. Performance, red-hot in 2019 and 2020, has cooled lately, in part because the managers have taken some profits in the fund’s tech stocks. Also, firms with less-than-stellar balance sheets and inconsistent profits have flourished recently, and the fund favors high-quality firms.

The last word: Midcap Growth has been a Kip 25 top performer.

8 of 25

Parnassus Mid Cap

PARMX
  • Symbol:PARMX
  • 1-year return: 24.8%
  • 3-year return: 12.4%
  • 5-year return: 12.1%
  • 10-year return: 14.1%
  • Yield: 0.2%
  • Expense ratio: 0.98%

The focus: Midsize firms that meet high environmental, social and governance standards.

The process: Matt Gershuny and comanager Lori Keith hunt for businesses with in-demand products or services that dominate their industries. Some firms have both defensive and offensive traits. Software and services tech company Trimble (TRMB), for instance, is diversified across numerous industries, from agriculture and natural resources to utilities and transportation.

The track record: ParnassusMid Cap’s value tilt has hobbled the fund in recent years. But it has largely kept pace with the Russell Mid Cap index over the long haul.

The last word: The fund is a solid, core ESG fund.

9 of 25

T. Rowe Price Small-Cap Value

PRSVX
  • Symbol:PRSVX
  • 1-year return: 55.0%
  • 3-year return: 11.5%
  • 5-year return: 14.1%
  • 10-year return: 14.3%
  • Yield: 0.3%
  • Expense ratio: 0.80%

The focus: Small-company bargains.

The process: Manager David Wagner favors profitable firms with a competitive edge over rivals – especially companies that are healthy enough to survive a one- to two-year downturn. In 2020, he scooped up dozens of stocks at low prices, including Planet Fitness (PLNT) and Papa John’s International (PZZA).

The track record: Since Wagner took over in mid-2014, the fund has swept past its peers.

The last word: Over the past 12 months, this high-quality fund has outperformed the Russell 2000 as value has recaptured investors' interest.

10 of 25

T. Rowe Price QM U.S. Small-Cap Growth

PRDSX
  • Symbol:PRDSX
  • 1-year return: 33.0%
  • 3-year return: 12.9%
  • 5-year return: 16.0%
  • 10-year return: 16.5%
  • Yield: 0.0%
  • Expense ratio: 0.78%

The focus: Small, growing companies.

The process: A quantitative model developed by manager Sudhir Nanda finds high-quality firms generating steady cash flows and earnings.

The track record: Over the past three, five and 10 years, the fund beat the Russell 2000 small-company index.

The last word: Don’t sweat the fund’s recent lag. A high-quality bias helps in downturns, but when non-profitable, low-quality stocks shine, as in recent months, the fund can lag its peers.

11 of 25

Brown Capital Management International Small Company

illustration of BCSVX
  • Symbol:BCSVX
  • 1-year return: 32.9%
  • 3-year return: 18.8%
  • 5-year return: 19.4%
  • 10-year return: --
  • Yield: 0.0%
  • Expense ratio: 1.33%

The focus: Small companies, mostly in developed foreign countries.

The process: Four managers work together to find what they call ex­ceptional growth companies. Those firms boast solid revenue and earnings growth, a competitive, sustainable position in their industries, and ex­ecutives with a vision of the future and an ability to deliver on it.

The track record: BCSVX's 21.3% annualized return over the past five years is roughly double the return of the MSCI ACWI Ex USA Small index. It easily beat its typical peer, too.

The last word: International Small Company held up better than its benchmark and peers during the pandemic selloff.

12 of 25

Fidelity International Growth

FIGFX
  • Symbol:FIGFX
  • 1-year return: 21.4%
  • 3-year return: 14.9%
  • 5-year return: 13.0%
  • 10-year return: 11.6%
  • Yield: 0.1%
  • Expense ratio: 1.01%

The focus: Growing foreign firms with a competitive edge in their industry.

The process: Manager Jed Weiss favors companies with attractive valuations, good balance sheets and solid growth prospects. “I make multiyear investments,” he says. In 2020, he picked up wish-list stocks that had fallen in price, including Kone (KNYJY), a Nordic elevator company.

The track record: The fund’s 10-year annualized return of 11.6% beat the average gain in the MSCI EAFE Index by about three percentage points.

The last word: Weiss is focusing currently on businesses that gained share during the pandemic, such as animal health firm Dechra Pharmaceuticals, which is benefiting from a boom in pet adoptions.

13 of 25

Janus Henderson Global Equity Income

HFQTX stock ticker
  • Symbol:HFQTX
  • 1-year return: 19.7%
  • 3-year return: 4.8%
  • 5-year return: 6.3%*
  • 10-year return: 6.7%*
  • Yield: 7.2%
  • Expense ratio: 0.95%

The focus: Dividend-paying foreign stocks that are trading at a discount.

The process: Three managers look for firms with strong balance sheets, steady profits and ample cash flow. The fund has a healthy yield.

The track record: Value-style investing, particularly overseas, has been challenging. Relative to other large-company, foreign value stock funds, Global Equity Income has been roughly middle-of-the-pack over the past three years. But it has lagged over the past year.

The last word: Value investing continues to show signs of life, so we are willing to practice patience with this fund.

* Returns as of Aug. 31, 2021. (Morningstar did not have current data available.)

14 of 25

Baron Emerging Markets

BEXFX
  • Symbol:BEXFX
  • 1-year return: 18.9%
  • 3-year return: 11.8%
  • 5-year return: 9.1%
  • 10-year return: 8.4%
  • Yield: 0.0%
  • Expense ratio: 1.35%

The focus: Emerging-markets companies of all sizes that have big growth potential.

The process: “Growthy” themes – such as cloud computing, financial tech­nology, and China’s pivot to local economies and consumers (instead of focusing on global exports) – drive the fund’s stock picking.

The track record: The fund, now almost 11 years old, trounced the MSCI Emerging Markets Index by an average of three percentage points per year over the past decade and beat 87% of its peers.

The last word: Portfolio manager Michael Kass has underperformed this year, but he sees better times ahead. “Emerging markets have entered the early innings of a typical EM bull market,” he says.

15 of 25

Fidelity Select Health Care

FSPHX
  • Symbol:FSPHX
  • 1-year return: 19.1%
  • 3-year return: 14.3%
  • 5-year return: 16.2%
  • 10-year return: 19.8%
  • Yield: 0.4%
  • Expense ratio: 0.69%

The focus: Companies that design, make or sell products or services used for healthcare or medicine.

The process: At the top of the portfolio, Ed Yoon holds hefty stakes in established firms he calls stable growers, such as UnitedHealth Group (UNH) and Humana (HUM). In the rest of the portfolio, he sprinkles in smaller bets on emerging growers – companies that may be reliant on, say, a particular drug approval or product.

The track record: Over the past 10 years, Select Health Care returned 19.8% annualized, which beat the 16.8% average gain of its health-fund peers.

The last word: Yoon is excited these days about gene and cell therapies, as well as medical equipment makers about to turn a profit.

16 of 25

T. Rowe Price Global Technology

Composite image representing T. Rowe Price's PRGTX fund
  • Symbol:PRGTX
  • 1-year return: 40.7%
  • 3-year return: 34.8%
  • 5-year return: 28.8%
  • 10-year return: 26.0%
  • Yield: 0.0%
  • Expense ratio: 0.86%

The focus: High-quality companies of any size, around the world.

The process: Manager Alan Tu isn’t afraid to go his own way. He doesn’t own Alphabet (GOOGL), Apple (AAPL) or Microsoft (MSFT), for example. The fund’s top holdings – Korea-based internet platform Sea Limited (SE), software firm Atlassian (TEAM) and Zoom Video Communications (ZM) – are smaller by market value.

“We’re not bearish on the mega-cap companies,” says Tu. But he sees promise in smaller ones. “We’re early in this digital transformation era. A lot of the trends driving growth are accelerating, creating opportunities.”

Software as a service, for example, is entering a new phase. Instead of going after big companies to sign long-term contracts – Atlassian is going straight to the consumer. Social media companies are evolving into e-commerce sites: Facebook users can buy certain wares directly on the platform. And the pandemic may have changed grocery shopping forever. That’s why Tu likes Grab, Southeast Asia’s version of Uber Technologies (UBER) and DoorDash (DASH); he also has a stake in private grocery delivery service Instacart.

The track record: Tu is relatively new; he stepped in as manager in March 2019. But he has been a Price analyst since 2013, mostly for Global Technology, and he has the heft of Price’s analyst bench behind him. Since he took over, the fund has beaten more than 80% of peers.

The last word: We still like American Century Small Cap Value (WMCVX), which PRGTX replaced, but we had to cast it out of the Kiplinger 25 because it closed to new investors in August.

17 of 25

Vanguard Wellington

Composite image representing Vanguard's VWELX fund
  • Symbol:VWELX
  • 1-year return: 21.8%
  • 3-year return: 12.3%
  • 5-year return: 11.6%
  • 10-year return: 11.5%
  • Yield: 1.6%
  • Expense ratio: 0.24%

The focus: A balanced portfolio of 65% stocks and 35% bonds. The fund yields 1.6%.

The process: Dan Pozen picks the stocks, investing in reasonably priced, resilient businesses that are run by trustworthy executives who allocate capital wisely. On the bond side, Loren Moran and Michael Stack hold high-quality corporate debt and Treasuries.

The track record: The fund’s 10-year record beats 88% of all balanced funds. It has done well of late, too, outperforming 75% of peers thanks to its exposure to cyclical and value sectors such as financials and energy.

The last word: If you’re new to the fund, you can buy shares through Vanguard; otherwise, it’s closed to new investors.

18 of 25

DoubleLine Total Return Bond

DLTNX
  • Symbol:DLTNX
  • 1-year return: 0.3%
  • 3-year return: 3.7%
  • 5-year return: 2.5%
  • 10-year return: 3.4%
  • Yield: 2.9%
  • Expense ratio: 0.75%

The focus: Mortgage-backed bonds.

The process: Three managers build a low-volatility portfolio by balancing the risks of two different kinds of mortgage bonds. Government-guaranteed agency bonds are sensitive to interest-rate moves (when interest rates rise, bond prices fall, and vice versa) but have no default risk; non-agency bonds have some risk of default, but little interest-rate sensitivity. At last report, the fund held 42% of its assets in agency-backed mortgages, 36% in non-agency bonds, 19% in Treasuries and cash, and another 3% in asset-backed securities and collateralized loan obligations (CLOs).

The track record: The fund beat the Bloomberg Barclays U.S. Aggregate Bond index over the past decade. It also has outperformed both the Agg and its peers in 2021.

The last word: Don’t count these masterful bond pickers out.

19 of 25

Fidelity Intermediate Municipal Income

FLTMX
  • Symbol:FLTMX
  • 1-year return: 3.4%
  • 3-year return: 4.5%
  • 5-year return: 2.8%
  • 10-year return: 3.1%
  • Yield: 0.5%
  • Expense ratio: 0.34%

The focus: Bonds that are exempt from federal income tax, issued by states and counties to fund school and transportation projects, among others.

The process: High-quality, attractively priced muni bonds make the grade here. The managers bought “aggressively” last spring, summer and fall, says comanager Elizah McLaughlin, when prices were low. Managing risk is a priority.

The track record: Over the past decade, the fund delivered average returns with below-average volatility.

The last word: Low supply and high demand have boosted the muni market, but prices are rich. “We’re being selective now,” says McLaughlin. The fund yields 0.5%, which is a tax-equivalent yield of 0.7% for investors in the 24% marginal tax bracket.

20 of 25

Metropolitan West Total Return

MWTRX
  • Symbol:MWTRX
  • 1-year return: -0.2%
  • 3-year return: 5.8%
  • 5-year return: 3.2%
  • 10-year return: 3.9%
  • Yield: 0.8%
  • Expense ratio: 0.67%

The focus: Investment-grade (rated triple-A to triple-B) medium-maturity bonds. The fund yields 0.8%.

The process: Four bargain-minded managers make the big-picture calls; a team of specialists do the security picking. The portfolio holds a mix of Treasuries, corporate bonds, and mortgage- and asset-backed securities.

The track record: The fund beats the Agg index, on average, over the long haul.

The last word: The managers are disciplined about buying low and selling high, which has served investors well.

21 of 25

Vanguard Emerging Markets Bond

illustration of VEMBX
  • Symbol:VEMBX
  • 1-year return: 5.6%
  • 3-year return: 9.9%
  • 5-year return: 7.8%
  • 10-year return: --
  • Yield: 3.2%
  • Expense ratio: 0.60%

The focus: Emerging-markets bonds issued in U.S. dollars.

The process: Vanguard’s fixed income group invests in government and corporate debt issued in emerging countries. The managers have some wiggle room – they can venture into bonds denominated in local currencies, for example – but “never so much that it changes the character of the fund,” says lead manager Dan Shaykevich. They also use derivatives, not to goose performance but to manage portfolio risk. That allows them to take advantage of opportunities “without taking on unintended risk,” Shaykevich says.

The track record: Since its March 2016 launch, the fund’s 9.5% annualized gain has beaten the 6.0% return in the JPM EMB index of emerging-markets bonds, the fund’s benchmark.

The last word: This high-yielding asset class is in vogue these days because of low yields in competing bonds and the improving growth outlook for foreign economies, among other reasons. The fund yields 3.2%.

22 of 25

Fidelity Strategic Income

FADMX
  • Symbol:FADMX
  • 1-year return: 8.7%
  • 3-year return: 6.3%
  • 5-year return: 5.2%*
  • 10-year return: 4.7%*
  • Yield: 2.0%
  • Expense ratio: 0.67%

The focus: To generate more income than the Agg index by investing in a blend of bonds. The fund yields 2.0%; the Agg yields 1.3%.

The process: The managers start with a benchmark made up of 45% high-yield bonds (debt rated triple-B to single-C), 25% U.S. government bonds and 30% foreign debt, but they can shift those positions up or down by 10 percentage points if they see opportunity.

The track record: Over the past five years, the fund’s 5.2% annualized return beat the Agg’s 3.1% average annual gain. Its junkier bonds helped the fund return 8.7% over the past 12 months, which was better than 82% of its peers: multi-sector bond funds.

The last word: A slug of high-yield debt makes this fund a bumpier ride compared with the high-quality Agg index.

* Returns as of March 31, 2021. (Morningstar did not have current data available.)

23 of 25

Vanguard High-Yield Corporate

VWEHX
  • Symbol:VWEHX
  • 1-year return: 8.5%
  • 3-year return: 6.4%
  • 5-year return: 5.8%
  • 10-year return: 6.5%
  • Yield: 2.7%
  • Expense ratio: 0.23%

The focus: Corporate debt rated below investment grade.

The process: Manager Michael Hong is conservative about risk, so he favors bonds rated double-B, the best credit tier of the junk bond world. More recently, he is focused on debt issued by firms that will benefit from long-lasting pandemic trends (homebuilders with significant operations in the suburbs, for example).

The track record: Hong’s con­servative stance worked well for most of 2020, but riskier bonds have done better in recent months. Even so, the fund’s 10-year record beats 62% of its peers, and with below-average risk.

The last word: VWHEX is a good option for investors who want a de­fensive high-yield bond fund. The fund yields 2.7%.

24 of 25

Vanguard Short-Term Investment Grade

VFSTX
  • Symbol:VFSTX
  • 1-year return: 1.1%
  • 3-year return: 3.9%
  • 5-year return: 2.6%
  • 10-year return: 2.5%
  • Yield: 0.8%
  • Expense ratio: 0.20%

The focus: High-quality short-maturity bonds.

The process: Three managers with Vanguard’s fixed income group invest mostly in corporate debt.

The track record: Recent manager changes are a concern, and the current team took over in mid-2018. But a 3.9% three-year average annual return has beaten its typical peer (short-term bond funds).

The last word: The fund is best for investors managing near-term cash needs. The yield, 0.8%, is better than the best one-year CD rate available today.

25 of 25

TIAA-CREF Core Impact Bond

TSBRX
  • Symbol:TSBRX
  • 1-year return: 0.1%
  • 3-year return: 5.2%
  • 5-year return: 3.1%
  • 10-year return: --
  • Yield: 1.0%
  • Expense ratio: 0.61%

The focus: Bonds that pass strict ESG criteria or that make a quantifiable environmental or social impact.

The process: Three managers build a diversified portfolio of Treasuries, agency mortgage-backed debt, cor­porate IOUs and a smattering of muni bonds. “We want investors to experience a core bond offering,” says lead manager Stephen Liberatore.

The track record: The fund’s five-year annualized return of 3.1% beat the Agg index. But its 1.0% yield falls short of the benchmark’s 1.3%.

The last word: TIAA-CREF Core Impact is a solid ESG bond fund and a good choice for investors who deem making an impact an important consideration.

Sours: https://www.kiplinger.com/investing/mutual-funds/602176/kip-25-best-low-fee-mutual-funds

5 U.S. Small-Cap Value Index Funds

Value stocks typically trade at low prices relative to performance. These five funds are among the few small-cap index funds that focus all or in part on value selection:

  • Vanguard Small-Cap Value Index Fund (VSIAX)
  • Dimensional Tax-Managed U.S. Targeted Value Portfolio (DTMVX)
  • Dimensional U.S. Targeted Value Portfolio (DFFVX)
  • TIAA-CREF Small-Cap Blend Index Fund (TISBX)
  • Fidelity Small Cap Enhanced Index Fund (FCPEX)

For a diversified portfolio, consider adding these small-cap index funds that focus mostly or all on value.

The Vanguard Small-Cap Value Index Fund

The Small-Cap Value Index Fund is closed to new investors; however, Vanguard manages an exchange traded fund (ETF) version of the investment called Vanguard Small-Cap Value ETF (VBR).

As of Q1 2021, the mutual fund held about $44.7 billion in small- and mid-cap stocks that track the CRSP U.S. Small-Cap Value Index. The fund's expense ratio is relatively low at 0.07%, which is the same as the ETF version (also 0.07%).

Dimensional U.S. Targeted Value Portfolio

The U.S. Targeted Value Portfolio invests at least 80% of assets in small- and mid-cap companies that Dimensional believes are value stocks with higher profitability. It looks for companies that have a low price-to-book ratio, and will also consider price-to-cash flow and price-to-earnings ratios. The fund's benchmark is the Russel 2000 Value Index.

As of Q1 2021, it held $5.9 billion in assets, with 24.3% allocated to the financial sector, 22.4% to the industrial goods sector, and 15.1% to consumer discretionary. It has an expense ratio of 0.44%.

Dimensional Tax-Managed U.S. Targeted Value Portfolio

The Tax-Managed U.S. Targeted Value Portfolio is similar to the fund above, but with an emphasis on minimizing federal taxes. Dimensional achieves this by offsetting capital gains with losses and delaying capital gains until they are taxed at lower, long-term rates. Average turnover is about 24% of its portfolio. The fund's benchmark is the Russel 2000 Value Index.

As of Q1 2021, the fund held $12.9 billion in assets, with 27.6% allocated to financials, 21.6% to industrials, and 14% to consumer discretionary. It has an expense ratio of 0.33%.

TIAA-CREF Small-Cap Blend Index Fund

The TIAA-CREF Small-Cap Blend Index Fund invests at least 80% of its assets in value and growth stocks found in the Russell 2000 Index.

At the end of April 2021, the fund held $4.8 billion invested in more than 1,900 positions. Healthcare dominated its allocation at 21%, followed by financials with 17.2%, and information technology and industrials each with about 15%. Its expense ratio is 0.06%.

Fidelity Small Cap Enhanced Index Fund

The Small-Cap Enhanced Index Fund invests about 80% of assets in stocks that make up the Russell 2000 Index, but Fidelity aims to beat the index by using computer-aided, quantitative analysis to make its picks.

As of Q1 2021, the fund held about $729 million in assets, with 23.1% allocated to healthcare, 16.6% to financials, and 16.3% to information technology. Its expense ratio is 0.64%.

Sours: https://www.investopedia.com/articles/investing/020416/5-best-us-small-cap-value-index-mutual-funds.asp
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Best Small Cap Mutual Funds to Invest in 2021

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Small cap funds are a class of equity funds that invest predominantly in companies across all market sectors with a market capitalisation in the range of Rs 10 crore and Rs 500 crore. These companies are ranked after 250 in the list of companies by market capitalisation. We have covered the following in this article:


Introduction to Best Small Cap Mutual Funds

Small cap funds are those equity funds whose portfolio is mostly constituted by equity and equity-linked securities of companies that are ranked after 250 in the list of companies by market capitalisation. The market capitalisation of the underlying companies of small cap companies is in the range of Rs 10 crore and Rs 500 crore.

Since the size of these companies is relatively small, they have a very high potential to grow. Therefore, small cap companies have the potential to provide much higher returns than mid-cap and large-cap funds. On the flip side, the risk possessed by these funds is also on the higher side. Small cap funds can be volatile at times.


Best Small Cap Funds

 

The table below shows the top-performing small cap funds based on the past 3-year and 5-year returns:

Mutual fund 5 Yr. Returns 3 Yr. Returns Min. Investment Rating

Who Should Invest in Best Small Cap Mutual Funds?

Small cap funds are known for their potential to offer high returns. These funds have a higher probability of outperforming the benchmark when the markets are bullish. However, when the markets enter a slump phase, the NAV of the fund gets affected significantly. Market movements heavily influence these funds.

If you are ready to take some risk to optimise the returns on your portfolio, then you can choose to invest in small-cap funds. Investing a small portion of your portfolio in small cap funds for a long-term is an excellent means of generating good returns. Risk-averse investors may not consider these funds as they can be volatile at times.


Taxability of Best Small Cap Funds

Since small cap funds are a class of equity mutual funds, they are necessarily taxed like any other equity fund plan. The dividends offered by these funds, if any, are added to your overall income and taxed as per the income tax slab rate you fall under.

Short-term capital gains realised on selling your fund units within a holding period of one year are taxed at a rate of 15%, irrespective of your income tax slab rate. Long-term capital gains of up to Rs 1 lakh realised on redeeming your units after a holding period of one year are made tax-exempt. Any gains over this limit are taxed at 10%, and there is no benefit of indexation provided.


Risk Possessed by Small Cap Funds

As mentioned earlier, small cap funds are a class of equity funds. Hence, these funds also carry the same set of risks that any other equity fund scheme comes with. These funds possess market risk, concentration risk, and volatility risk. High-risk investments come with high return potential.

You can mitigate the risks to a great extent by investing via a systematic investment plan (SIP) for a long period (say five years and more). Since these funds require a long-term investment horizon, it is suitable only if you are willing to take some risk and can stay invested for at least five years.


Things an Investor Should Consider When Investing in Best Small Cap Mutual Funds

Small cap mutual funds are subject to market risk, and investors must weigh in various components that affect the performance of the funds. You need to consider your age, the level of risk tolerance, the objective of your investment, and your investment horizon. The following are some of the other things that you must remember before investing in small-cap funds:

    1. Construction of the portfolio

Pick those small cap mutual funds that balance your portfolio. Consider investing in small-cap funds that invest in small-cap stocks across various sectors. It is wise to avoid funds that predominantly invest in a few stocks. You should also look into the frequency of the trading activity going on in the fund. Successful funds tend to have lower portfolio turnover ratios of less than 30%.

    1. Past performance of the small cap fund

Note that when deciding on a particular mutual fund, you can’t rely only on the recent performance, regardless of how well they have performed. You must take into consideration the performance of the fund across the bullish and bearish market cycles. Find out the past five year returns and compare it with peer funds. If a fund has been consistent in all market conditions and periods, then you can go ahead with it. However, note that past performance is not indicative of future returns.

    1. Check the P/E ratio

The P/E ratio will give you an idea about the underlying growth potential of the fund. It will also tell you how much your fund is overpaying for growth. Small-cap mutual funds with a P/E ratio of above 30x are considered expensive.

    1. Choice of a quality fund house

Do your research and pick those fund houses that have a history of beating benchmark performances in both market highs and lows. An ideal fund house should have an impeccable investment process along with the technique of managing risk, an expert research team, and excellent coverage.

    1. Know what your options are

Explore options that allow your small-cap fund the much-needed flexibility to hold high cash or even invest in the mid- and large cap stocks. Doing this will no doubt slower the returns on your fund as compared to the returns with the small-cap, but you will get to hold more cash.

    1. Returns must be risk-adjusted

There is no doubt that small-cap funds carry risk, but there are funds that can manage risk better than peers. Explore options and the potential of garnering good returns from various schemes with low volatility.


Advantages of Best Small Cap Mutual Funds

Historically, the best small cap mutual funds have provided exponential growth and returns. Given that these stocks are relatively less scrutinised and traded by large investors, there is also a good chance of discovering some undervalued stocks among small-cap companies for small cap funds. These funds are expected to perform well when the markets are booming. You have to stay invested for at least five years to reap excellent returns.

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Small Cap Growth VS Small Cap Value - Which One Is Better?

Small-Company Stock Funds

In the tables below, see the ten top-performing for the past 1-, 3-, 5-, 10- and 20-year periods. Click on any fund's symbol for a daily market snapshot of the fund.

The Kiplinger 25: Our Favorite No-Load Mutual Funds | Read All Fund Watch Columns

Data through September 30, 2021

Small-Company Stock Funds - 1 year

FUND NAMESYMBOL1-YR
RETURN
3-YR
RETURN
5-YR
RETURN
10-YR
RETURN
20-YR
RETURN
VOL RANKMAX. SALES CHARGEEXPENSE RATIO
Bridgeway Small Cap ValueBRSVX108.08%15.85%16.62%15.68%—%10none%0.91%
Kinetics Small Capital Opportunities No LoadKSCOX93.9213.4720.0817.4911.18102.00r1.64
Perritt Ultra MicroCapPREOX84.7810.9510.9412.13102.00r2.68
Bridgeway Ultra-Small Company**BRUSX83.6614.9313.6113.7611.6810none1.19
Invesco Small Cap Value A**VSCAX83.1613.0413.4315.0211.08105.501.12
Prudential QMA Small-Cap Value ATSVAX82.586.799.0311.710.53105.501.11
Victory Integrity Discovery AMMEAX81.967.8311.2415.1710.37105.751.62
Pimco RAE Fundamental US Small APMJAX81.9212.2313.3103.750.93
Bridgeway Ultra Small Company MarketBRSIX81.5612.6814.2915.7812.01102.00r0.75
Oberweis Micro-CapOBMCX81.5416.8320.7519.8412.83101.00r1.58

r Maximum redemption fee charged when you sell shares. — Fund has not existed for the specified time. s Front-end sales charge; redemption fee may apply. Source: Morningstar, Inc.

Data through September 30, 2021

Small-Company Stock Funds - 3 years

FUND NAMESYMBOL1-YR
RETURN
3-YR
RETURN
5-YR
RETURN
10-YR
RETURN
20-YR
RETURN
VOL RANKMAX. SALES CHARGEEXPENSE RATIO
Morgan Stanley Instl Fund Small Co Growth AMSSMX67.39%46.4%35.2%23.09%14.76%105.25%s1.25%
PineBridge US Micro Cap Portfolio RJMCGX71.937.6229.5719.0210.83102.00r2.3
Needham Small Cap GrowthNESGX57.2436.7428.4219.519none1.85
Driehaus Micro Cap GrowthDMCRX62.6230.330.47102.00r1.43
Needham Aggressive GrowthNEAGX46.9628.8321.4918.1312.19none1.95
Wasatch Ultra GrowthWAMCX32.7527.8429.3621.3912.94102.00r1.19
T. Rowe Price New HorizonsPRNHX32.5927.1827.4823.1215.888none0.75
Driehaus Small Cap Growth InvDVSMX50.4226.41102.00r1.2
Columbia Small Cap Growth I A**CGOAX33.7926.2126.419.8313.12105.751.29
Wasatch Micro CapWMICX38.8125.3327.7321.0613.81102.00r1.66

r Maximum redemption fee charged when you sell shares. — Fund has not existed for the specified time. s Front-end sales charge; redemption fee may apply. Source: Morningstar, Inc.

Data through September 30, 2021

Small-Company Stock Funds - 5 years

FUND NAMESYMBOL1-YR
RETURN
3-YR
RETURN
5-YR
RETURN
10-YR
RETURN
20-YR
RETURN
VOL RANKMAX. SALES CHARGEEXPENSE RATIO
Morgan Stanley Instl Fund Small Co Growth AMSSMX67.39%46.4%35.2%23.09%14.76%105.25%s1.25%
Driehaus Micro Cap GrowthDMCRX62.6230.330.47102.00r1.43
PineBridge US Micro Cap Portfolio RJMCGX71.937.6229.5719.0210.83102.00r2.3
Wasatch Ultra GrowthWAMCX32.7527.8429.3621.3912.94102.00r1.19
Needham Small Cap GrowthNESGX57.2436.7428.4219.519none1.85
Wasatch Micro CapWMICX38.8125.3327.7321.0613.81102.00r1.66
T. Rowe Price New HorizonsPRNHX32.5927.1827.4823.1215.888none0.75
Columbia Small Cap Growth I A**CGOAX33.7926.2126.419.8313.12105.751.29
Virtus Small-Cap Sustainable Growth APSGAX20.4622.2526.2121.3775.501.35
Baron Discovery RetailBDFFX35.6120.1625.2310none1.35

r Maximum redemption fee charged when you sell shares. — Fund has not existed for the specified time. s Front-end sales charge; redemption fee may apply. Source: Morningstar, Inc.

Data through September 30, 2021

Small-Company Stock Funds - 10 years

FUND NAMESYMBOL1-YR
RETURN
3-YR
RETURN
5-YR
RETURN
10-YR
RETURN
20-YR
RETURN
VOL RANKMAX. SALES CHARGEEXPENSE RATIO
T. Rowe Price New HorizonsPRNHX32.59%27.18%27.48%23.12%15.88%8none%0.75%
Morgan Stanley Instl Fund Small Co Growth AMSSMX67.3946.435.223.0914.76105.25s1.25
Wasatch Ultra GrowthWAMCX32.7527.8429.3621.3912.94102.00r1.19
Virtus Small-Cap Sustainable Growth APSGAX20.4622.2526.2121.3775.501.35
Federated Kaufmann Small Cap AFKASX33.0920.2224.6221.1695.501.35
Wasatch Micro CapWMICX38.8125.3327.7321.0613.81102.00r1.66
Hood River Small-Cap Growth InvHRSRX54.1521.0221.9420.6610none1.25
Oberweis Micro-CapOBMCX81.5416.8320.7519.8412.83101.00r1.58
Columbia Small Cap Growth I A**CGOAX33.7926.2126.419.8313.12105.751.29
AllianceBernstein Small Cap Growth AQUASX36.0920.2725.1219.6412.6794.251.09

r Maximum redemption fee charged when you sell shares. — Fund has not existed for the specified time. s Front-end sales charge; redemption fee may apply. Source: Morningstar, Inc.

Data through September 30, 2021

Small-Company Stock Funds - 20 years

FUND NAMESYMBOL1-YR
RETURN
3-YR
RETURN
5-YR
RETURN
10-YR
RETURN
20-YR
RETURN
VOL RANKMAX. SALES CHARGEEXPENSE RATIO
T. Rowe Price New HorizonsPRNHX32.59%27.18%27.48%23.12%15.88%8none%0.75%
Morgan Stanley Instl Fund Small Co Growth AMSSMX67.3946.435.223.0914.76105.25s1.25
Wasatch Micro CapWMICX38.8125.3327.7321.0613.81102.00r1.66
Royce Smaller-Companies Growth ServiceRYVPX49.816.9718.6715.3313.27101.00r1.49
Columbia Small Cap Growth I A**CGOAX33.7926.2126.419.8313.12105.751.29
Buffalo Small Cap**BUFSX42.3924.2224.8619.413.0910none1.01
Lord Abbett Developing Growth A**LAGWX28.3720.3624.5318.6313.02105.750.93
Wasatch Ultra GrowthWAMCX32.7527.8429.3621.3912.94102.00r1.19
William Blair Small Cap Growth NWBSNX46.5315.2819.9718.7512.919none1.5
Oberweis Micro-CapOBMCX81.5416.8320.7519.8412.83101.00r1.58

r Maximum redemption fee charged when you sell shares. — Fund has not existed for the specified time. s Front-end sales charge; redemption fee may apply. Source: Morningstar, Inc.

Sours: https://www.kiplinger.com/kiplinger-tools/investing/t041-s001-top-performing-mutual-funds/index.php?table_select=SmStock

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