Risk-loving investors, who give precedence to capital appreciation along with dividend payouts, may consider small-cap blend mutual funds to derive healthy returns. These funds focus on realizing an appreciable amount of capital growth by investing in stocks that are projected to rise over the long term.
Meanwhile, small-cap funds are good choices for investors seeking diversification across different sectors and companies. Small-cap funds 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 less international exposure, small-cap funds offer higher protection than their large and mid-cap counterparts in any global downturn.
Below, we share with you three top-ranked, small-cap blend mutual funds, namely Vanguard Strategic Small-Cap Equity Inv VSTCX, Fidelity Small Cap Stock FSLCX and Lord Abbett Alpha Strategy ALFAX. 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 small-cap blend funds.
Vanguard Strategic Small-Cap Equity Inv fund invests most of its net assets in domestic equity securities of small-capitalization companies, which its advisors believe have strong growth prospects as well as reasonable valuations with respect to their industry peers.
Vanguard Strategic Small-Cap Equity Inv fund has three-year annualized returns of 15%. As of June 2025, VSTCX held 561 issues, 0.8% of its assets invested in Popular, Inc.
Fidelity Small Cap Stock fund seeks long-term growth of capital. FSLCX invests most of its assets in common stocks of companies with small market capitalizations (which, for the purposes of this fund, are those with market capitalization similar to companies in the Russell 2000 Index or the S&P SmallCap 600).
Fidelity Small Cap Stock has three-year annualized returns of 12.7%. FSLCX has an expense ratio of 0.86%.
Lord Abbett Alpha Strategy fund seeks long-term capital appreciation. ALFAX invests in other mutual funds rather than directly in portfolio securities like stocks, bonds, and money market instruments.
Lord Abbett Alpha Strategy has three-year annualized returns of 10.4%. Giulio A. Martini has been one of the fund managers of ALFAX since 2015.
To view the Zacks Rank and the past performance of all small-cap blend mutual funds, investors can click here to see the complete list of small-cap blend mutual funds.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
