Markets

4 Small-Cap Mutual Funds to Ride Out Trade Uncertainties

Mutual fund investors who aren’t willing to risk much can opt for funds that are focused on small-capitalization companies. These companies not only have solid growth potential but are also protected against issues affecting global trade and financial markets.

This is because most of such companies are still in their early stage of business cycle and aren’t exposed much to the global markets to be affected by international affairs.

US-China Trade Negotiations Hit a Deadlock

The trade talks between the United States and China made much progress since October, after President Donald Trump decided against the earlier planned tariff raise on about $250 billion worth of Chinese goods from the present 25% to 30%. In addition, a 15% tariff imposition on about $156 billion of Chinese products (known as List 4B) starting Dec 15 was kept on hold.

However, trade negotiations hit a snag earlier this week, after Trump blamed the earlier American leaders who negotiated deals with China of leaving scope for manipulation. He even said that the United States has yet to roll back the existing tariffs as part of the first phase of the trade agreement.

China has been insistent about the removal of U.S. tariffs from their products. The country stated that the trade war started with the imposition of additional tariffs, and hence should end with the rolling back of the taxes. The country has called for the roll-back of tariffs as part of the “phase one” agreement.

The countries were expected to sign a partial trade agreement at the APEC Summit in November. However, the date has been deferred to December, with no new information available on the same.

Our Choices

We have, therefore, selected four mutual funds that invest in securities of small-capitalization companies. All these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging year-to-date returns. Additionally, the minimum initial investment is within $5,000.

We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.

The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Northern Small Cap Value Fund NOSGX invests the majority of its assets in equity securities of small-capitalization companies. The fund may focus on specific companies or market segments, such as financial services. NOSGX seeks long-term capital appreciation.

This Zacks sector – Small Cap Value product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

NOSGX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 1.00%, which is below the category average of 1.23%. It has returned 17.1% on a year-to-date basis. NOSGX has a minimum initial investment of $2500.

Fidelity Small Cap Stock Fund FSLCX seeks long-term capital growth. The fund invests the majority of its assets in common stocks of small-capitalization companies. The fund invests in both U.S. and non-U.S. issuers.FSLCX invests in either growth stocks or value stocks or both.

This Zacks sector – Small Cap Blend product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSLCX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.67%, which is below the category average of 1.12%. It has returned 22.6% on a year-to-date basis. FSLCX has no minimum initial investment.

Loomis Sayles Small Cap Growth Fund Retail Class LCGRX invests the majority of its assets in equity securities of small-capitalization companies which comprise preferred stocks, warrants, securities convertible to common or preferred stocks, etc. The fund seeks capital appreciation.

This Zacks sector – Small Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

LCGRX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 1.19%, which is below the category average of 1.22%. It has returned 17.7% on a year-to-date basis. LCGRX has a minimum initial investment of $2500.

Hartford Small Cap Growth HLS Fund Class IA HISCX aims for long-term capital growth. The fund invests majority of its assets in common stocks of small-capitalization companies. The fund advisor considers small-capitalization companies as those with market capitalization within the collective range of the Russell 2000 and S&P SmallCap 600 Indices.

This Zacks sector – Small Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

HISCX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.65%, which is below the category average of 1.22%. It has returned 23.4% on a year-to-date basis. HISCX has no minimum initial investment.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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