Yahoo Finance 3 Small-Cap Value Mutual Funds to Build a Solid Portfolio
A favorable inflation trend and the frenzy surrounding artificial intelligence in various industries have given investors profitable returns so far this year. Investors’ confidence has recovered from last year. The Dow, the S&P 500 and the tech-heavy Nasdaq have jumped 12.4%, 22.9% and 41.0%, respectively, over the year-to-date period.
The Federal Reserve’s aggressive monetary policy tightening since March 2022, has brought down inflation from the high of 9.1% in June 2022. However, current inflation is still above the Fed’s ambitious target of 2%.
The annual rise in the Consumer Price Index for the month of November was 3.1% from a year ago. The monthly rate indicates a modest rise of 0.1% from October to November. A slight increase in headline inflation readings is mostly due to an increase in the rental cost. Jobs growth accelerated in November as nonfarm payrolls increased by 199,000 jobs last month, while the unemployment rate fell to 3.7% in the same period from a two-year high of 3.9% in October.
U.S. retail sales also rose unexpectedly in November ahead of the holiday season. Retail sales increased 0.3% last month after falling 0.2% in October. Considering that inflation is gradually inching toward a favorable range and the economy is still resilient with 5.2% GDP growth in Q3 that beat the estimate of 4.9%, the Fed is mostly likely to ease its monetary policy outlook in the near future.
Keeping a long-term horizon in mind, small-cap funds are a good choice for investors seeking diversification across different sectors and companies that are available at a price that is lower than its fundamentals (i.e. earnings, book value, Debt-Equity). Investors with a high-risk appetite should invest in these funds.
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. These funds have the majority of their investments in sectors such as technology, finance, retail trade, energy and industrial cyclical, which will help investors in long-term growth and preservation of wealth.
Mutual funds, in general, reduce transaction costs and diversify their portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have, thus, selected three small-cap value mutual funds that have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio compared to the category average of 1.16%.
Invesco Small Cap Value VSMIX fund invests most of its assets along with borrowings, if any, in securities of small-cap companies that Invesco advisors believe are undervalued. VSMIX advisors also invest in derivatives and other instruments that have similar economic characteristics.
Jonathan Mueller has been the lead manager of VSMIX since Jun 24, 2010. Most of the fund’s investments were in companies like Pinnacle Financial (2.8%), Northern Oil & Gas (2.7%) and Lumentum Holdings (2.4%) as of Jul 31, 2023.
VSMIX has a 3-year and 5-year annualized returns of 20.4% and 14.8%, respectively. VSMIX has a Zacks Mutual Fund Rank #1 andan annual expense ratio of 0.84%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Bridgeway Small-Cap Value BRSVX fund invests most of its assets along with borrowings, if any in a diversified portfolio of small-cap value stocks that are listed on the New York Stock Exchange, NYSE American, and NASDAQ at the time of purchase. BRSVX advisors uses a statistical approach to make investment decisions.
John N.R. Montgomery has been the lead manager of BRSVX since Oct 30, 2003. Most of the fund’s investments were in companies like Chico’s Fas (1.5%), Hostess Brands (1.4%) and Group 1 Automotive (1.4%) as of Sep 30, 2023.
BRSVX has a 3-year and 5-year annualized returns of 19.8% and 12.3%, respectively. BRSVX has a Zacks Mutual Fund Rank #2 andan annual expense ratio of 0.86%.
PIMCO RAE US Small PMJAX fund invests most of its net assets in equity securities of small-cap companies that are economically tied to the United States. PMJAX advisors choose to invest in stocks based on certain liquidity and capacity requirements.
Christopher J. Brightman has been the lead manager of PMJAX since Apr 14, 2015. Most of the fund’s investments were in companies like Dillards (3.9%), Abercrombie & Fitch (3.1%) and Warrior Met Coal (3.1%) as of Jun 30, 2023.
PMJAX has 3-year and 5-year annualized returns of 16.1% and 10.1%, respectively. PMJAX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.90%
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