SPVAX John Hancock Small Cap Equity Fund Class A

When investors have the willingness to take short term positions and the ability to bear a certain degree of risk, small-cap funds could be the correct choice. These funds generate significant demand driven sales during a market upswing, which lead to an increase in their prices. Smaller firms also look to continuously reinvest their profits back into their business. This reassures shareholders of superior performance and higher profit potential from such companies. Small Cap funds therefore make excellent additions to a well-diversified portfolio.

Below we will share with you 5 top rated small-cap mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all small-cap funds, investors can click here to see the complete list of funds.

JHancock Small Cap Equity A (SPVAX) seeks capital growth. The fund invests a large proportion of its assets in small companies. The market capitalization of these companies must be identical to firms which are part of the Russell 2000 index. This small-cap mutual fund has a three year annualized return of 22.07%.

The small-cap mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.28% compared to a category average of 1.48%.

Waddell & Reed Small Cap A (UNSAX) invests at least 80% of its assets in domestic and foreign small-cap companies. The fund focuses on acquiring common stocks of companies which are new entrants, particularly those entering growing sectors. This small-cap mutual fund has a three year annualized return of 22.46%.

The fund manager is Frank Brian James and he has managed this small-cap mutual fund since 1998.

Legg Mason ClearBridge Small Cap Growth A (SASMX) seeks long-term capital appreciation. The fund invests the majority of its assets in small-cap companies. It focuses on acquiring common stocks of domestic firms. This small-cap mutual fund has a three year annualized return of 21.43%.

As of December 2011, this small-cap mutual fund held 85 issues, with 3.28% of its total assets invested in Taleo Corporation A.

Virtus Quality Small-Cap A (PQSAX) invests heavily in small-cap companies. The fund invests in common stocks of a limited number of companies that are attractively priced relative to their underlying value. This small-cap mutual fund has a three year annualized return of 17.42%.

The small-cap mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.48% compared to a category average of 1.34%.

James Small Cap (JASCX) seeks capital appreciation over the long term. The fund invests the majority of its assets in common stocks of small cap firms. Companies invested in must have market capitalizations lower than stocks included in the Russell 2000 Index. This small-cap mutual fund has a three year annualized return of 19.04%.

The fund manager is Frank Brian James and he has managed this small-cap mutual fund since 1998.

To view the Zacks Rank and past performance of all small-cap mutual funds, investors can click here to see the complete list of funds.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds.