Small-cap funds are good choices for investors seeking diversification across different sectors and companies. Investors with a high-risk appetite should pick these funds. Small-cap funds generally invest in companies with a market cap lower than $2 billion. The companies, though smaller in size, offer growth potential and their market capitalization may increase subsequently.
Meanwhile, value stocks tend to trade at a price lower than their fundamentals (i.e., earnings, book value, debt-equity). It is common for some investors to invest in value funds for income or yield. However, not all value funds consist solely of companies that primarily use their earnings to pay dividends. Investors interested in choosing value funds for yield should make sure to check the mutual fund yield. The mutual fund yield is dividend payments divided by the value of the mutual fund’s shares.
Below, we share with you three small-cap value mutual funds, namely,DFA US Small Cap Value DFSVX, Vericimetry US Small Cap Value VYSVX and Hotchkis & Wiley Small Cap Diversified Value Fund HWVAX. 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.
DFA US Small Cap Value fund invests most of its net assets in securities of small-cap domestic companies. DFSVX advisors may also buy or sell futures and options contracts for U.S. equity securities and indices to adjust equity market exposure based on actual or expected cash flows from the fund.
DFA US Small Cap Value has three-year annualized returns of 13%. As of the end of July 2024, DFSVX held 983 issues, with 1% of its net assets invested in Mohawk Industries.
Vericimetry US Small Cap Value fund invests most of its assets in the common stock of domestic small-cap value companies at the time of purchase. VYSVX advisors invest in companies based on a market capitalization-weighted approach to determine the target weighting of the U.S. small-cap value stocks.
Vericimetry US Small Cap Value fund has a three-year annualized return of 10.7%. VYSVX has an expense ratio of 0.60%.
Hotchkis & Wiley Small Cap Diversified Value Fund invests most of its assets, along with borrowings, if any, in equity securities of domestic and foreign small-cap companies. HWVAX advisors generally invest in companies that are undervalued.
Hotchkis & Wiley Small Cap Diversified Value Fund has a three-year annualized return of 8.6%. Ryan Thomes has been the fund manager of HWVAX since June 2014.
To view the Zacks Rank and the past performance of all small-cap value mutual funds, investors can click here to see the complete list of small-cap value mutual funds.
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