Small-cap growth funds are natural choices for investors with a high risk appetite when capital appreciation over the long term takes precedence over dividend payouts. These funds focus on realizing an appreciable amount of capital growth by investing in stocks that are projected to rise in value over the long term.

Meanwhile, small-cap funds are good choices for investors seeking diversification across different sectors and companies. Small-cap funds generally invest in companies having market cap lower than $2 billion. The companies, smaller in size, offer growth potential and their market capitalization may increase subsequently. Also, due to their less international exposure, small-cap funds offer higher protection than their large- and mid-cap counterparts against any global downturn.

Below we share with you three top-rated, small-cap growth mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. 

Northern Small Cap Core (NSGRX – Free Report) seeks capital growth over the long run. NSGRX invests more than 80% of its assets in equity securities of small-cap companies having market capitalization similar to those listed on the Russell 2000 Index. Several companies that found their place in the NSGRX portfolio have the potential to register solid current and future earnings growth. Northern Small Cap Core has a three-year annualized return of 8.1%.

As of December 2016, NSGRX held 1,762 issues, with 0.33% of its assets invested in Jack In The Box Inc.

Putnam Small Cap Growth A (PNSAX – Free Report) invests in common stocks of companies having market capitalization within the range of the Russell 2000 Growth Index. PNSAX invests in securities of companies whose earnings growth is expected to outpace the same of its peers. Putnam Small Cap Growth A has a three-year annualized return of 4.1%.

PNSAX has an expense ratio of 1.22% as compared to the category average of 1.32%.