If you like investing in small-cap stocks but don't want to commit strictly to the growth or value style, check out the rather obscure small-cap blend category.
These funds typically invest in stocks of companies with market capitalizations below $1.5 billion. While most funds commit to a growth-investment style -- buying stocks of the fastest growing companies -- or a value-investment style -- hunting for bargains, blend funds mix both growth and value stocks in their portfolios.
This more diversified approach can keep these funds from posting outsize returns, but it also typically leads to lower volatility.
If big-cap growth stocks have grown into an outsize portion of your portfolio and you're looking for some small-cap exposure without too much risk, look this category over. We've sifted the group for those funds that beat their average peer over the last one- and three-year periods, according to
. Here's a top-10 list, ranked by one-year returns.
You might want to skip the top funds on our list. No-load
Schroder Micro Cap has a great record, but is currently closed to new investors, and the broker-sold
New Alternatives fund takes a concentrated approach with a decided bent toward "new energy" shops like
If you work with a broker, look at the broker-sold
Sentinel Small Company fund or the
Merrill Lynch Small Cap Value funds, which have both beaten more than 80% of their peers over the last one- and three-year periods, according to Morningstar.
Do-it-yourselfers with an aggressive streak might look over the
PBHG Small Cap Value fund, where manager Jerome Heppelmann isn't afraid to take big sector bets in shopping for beat-up stocks with promise.
If you're looking for a conservative fund, consider the
T. Rowe Price Small-Cap fund, which barely missed making our list. If you're a hard-core indexer, look at Vanguard's
These funds have outperformed the sector, but across the board, small-cap blend funds have performed quite well in this choppy year.
Looking at the holdings that make up the biggest chunk of these leading funds, the word is eclectic. Then again, since there are a slew of small-caps out there to choose from and these funds fish in both the value and growth pools, that's not really a surprise.
Editorial Assistant Dan Bernstein contributed to this article.