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Invest In 3 Small-Cap Value Mutual Funds for Strong Returns

Investors seeking diversification across sectors and companies, and focusing on gaining exposure to stocks at a discount may consider small-cap value funds. These funds are good choices for investors with a high risk appetite. Small-cap funds generally invest in companies having a market cap lower than $2 billion. The companies, smaller in size, offer growth potential and can subsequently see an increase in market capitalization.

Meanwhile, value stocks are those that tend to trade at a price lower than their fundamentals (i.e. earnings, book value and debt-equity). It is a common practice to invest in value funds for income or yield. However, not all value funds solely comprise companies that primarily use their earnings to pay dividends. Investors interested in choosing value funds for yield, should surely check the mutual fund yield, which is dividend paid out divided by the value of the mutual fund’s shares.

Below we share with you three top-ranked, small-cap value mutual funds. 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 all small-cap value mutual funds.

Invesco Small CapValue A VSCAX seeks capital appreciation for the long run. VSCAX invests a large chunk of its assets in securities, including common stocks of small-cap companies that the fund’s advisor, Invesco Advisers, Inc., considers to be underpriced. Invesco Small CapValue A has returned 10% over the past year.

VSCAX has an expense ratio of 1.11% compared with the category average of 1.27%.

Bridgeway Ultra Small Company Market Fund BRSIX invests the majority of its assets in stocks of ultra-small companies, which is judged by their size at the time of investment. The fund aims to offer long-term appreciation of capital. BRSIX approximates the total returns of the Cap-Based Portfolio 10 Index over long periods of time. Bridgeway Ultra Small Company Market Fund has one-year annualized returns of 9.6%.

As of December 2017, BRSIX held 611 issues with 0.72% of its assets invested in ION Geophysical Corp.

Franklin Small Cap Value A FRVLX seeks returns for the long run. The fund invests a bulk of its assets in securities of small-cap companies. FRVLX focuses on investing primarily in those small-cap companies whose market cap is higher than either the biggest market-cap company of the Russell 2000 Index or of the 12-month average of the highest market-cap company included on the Russell 2000 Index. Franklin Small Cap Value A has returned 6.1% over the past year.

Steven B. Raineri is one of the fund managers of FRVLX since 2012.

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

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