Small-cap mutual funds are an excellent investment option for individuals looking to diversify their portfolios and seek high growth potential. These funds invest in companies with smaller market capitalizations, typically under $2 billion, which tend to be more volatile but also offer greater upside potential compared to large-cap stocks. For investors looking to capitalize on emerging opportunities, small-cap mutual funds can be a game-changer.
If you’re considering adding small-cap funds to your portfolio in 2025, here is a list of the best small-cap mutual funds to watch. These funds have been selected based on their historical performance, expense ratios, and the quality of their management teams.
1. Vanguard Small-Cap Index Fund (VSMAX)
Vanguard’s Small-Cap Index Fund is one of the most popular and reliable choices for small-cap exposure. It tracks the performance of the CRSP US Small Cap Index and is highly diversified across various sectors. Vanguard’s reputation for low fees and strong customer service adds to its appeal. With a low expense ratio of just 0.05%, VSMAX is a top contender when it comes to best small cap mutual funds.
Why Invest:
- Low expense ratio
- Broad diversification
- Strong historical performance
2. Fidelity Small Cap Growth Fund (FSSNX)
Fidelity’s Small Cap Growth Fund focuses on high-growth small companies. It invests in a mix of stocks that demonstrate potential for strong capital appreciation. The fund’s management team is highly skilled at identifying undervalued small-cap stocks with substantial growth prospects, making it one of the best small-cap mutual funds for investors seeking growth.
Why Invest:
- Targeted growth strategy
- Strong track record of performance
- Actively managed with a focus on growth
3. T. Rowe Price New Horizons Fund (PRNHX)
The T. Rowe Price New Horizons Fund is a well-regarded actively managed fund that invests in small-cap growth stocks. Its portfolio is diversified across several sectors, with a strong emphasis on technology and healthcare. This fund has consistently outperformed its benchmark, making it one of the best small cap mutual funds to consider for 2025.
Why Invest:
- Consistently outperforms benchmarks
- Focus on high-growth sectors
- Skilled management team
4. Schwab U.S. Small-Cap ETF (SCHA)
While technically an ETF, Schwab’s U.S. Small-Cap ETF offers many of the same benefits as a mutual fund, including diversification and exposure to a broad range of small-cap stocks. This fund tracks the performance of the Dow Jones U.S. Small-Cap Total Stock Market Index, making it a low-cost option for investors seeking to diversify their portfolios with small-cap exposure. It’s an excellent option for long-term investors interested in one of the best small cap mutual funds available.
Why Invest:
- Low expense ratio (0.04%)
- Tracks a broad small-cap index
- Convenient for long-term investors
5. JPMorgan Small Cap Equity Fund (VSEAX)
JPMorgan’s Small Cap Equity Fund has a strong history of performance, focusing on small companies that are poised for long-term growth. The fund’s active management style means that portfolio managers work to find opportunities for alpha generation, rather than simply tracking an index. The combination of robust research and strategic stock picking makes it one of the best small cap mutual funds in 2025.
Why Invest:
- Actively managed with a focus on high-growth
- Strong historical performance
- Experienced management team
6. BlackRock Small Cap Growth Fund (CSGAX)
BlackRock’s Small Cap Growth Fund focuses on growth-oriented small-cap stocks, with an emphasis on companies that have strong potential for earnings growth. The fund is highly diversified, reducing risk while capturing growth opportunities across various sectors. With its focus on the growth potential of small-cap stocks, CSGAX remains one of the best small cap mutual funds to watch.
Why Invest:
- Growth-focused strategy
- Diversification across sectors
- High potential for long-term capital appreciation
7. Dimensional Fund Advisors U.S. Small Cap Portfolio (DFSTX)
Dimensional Fund Advisors is known for its scientific and systematic investment strategies. The U.S. Small Cap Portfolio is designed to invest in small-cap stocks with strong potential for value appreciation. DFA’s investment approach focuses on capturing premiums from small-cap stocks with strong fundamentals. The low expense ratio and consistent performance make this one of the best small cap mutual funds for long-term investors.
Why Invest:
- Focus on systematic, research-driven investing
- Low expense ratio
- Strong long-term performance
8. American Funds Small Cap World Fund (SMCWX)
The American Funds Small Cap World Fund invests in small-cap stocks from around the globe. This diversified approach allows investors to tap into the growth potential of international markets while maintaining a focus on small-cap stocks. With a solid management team and a focus on long-term growth, this fund remains one of the best small cap mutual funds to consider in 2025.
Why Invest:
- Global diversification
- Focus on small-cap stocks
- Experienced management team
9. Vanguard Russell 2000 Index Fund (VTWO)
The Vanguard Russell 2000 Index Fund tracks the Russell 2000 Index, which is made up of small-cap stocks. This low-cost fund provides investors with exposure to small companies across various sectors. If you’re looking for a fund that provides exposure to a broad basket of small-cap stocks, Vanguard’s Russell 2000 Index Fund is a reliable choice among the best small cap mutual funds.
Why Invest:
- Tracks a well-known small-cap index
- Low expense ratio
- Broad market exposure
10. Invesco Small Cap Growth Fund (VSCGX)
Invesco’s Small Cap Growth Fund is an actively managed mutual fund that invests in small-cap growth stocks. With a focus on high-quality, high-growth companies, the fund has demonstrated strong performance over the years. The management team actively selects stocks with strong growth potential, making it one of the best small cap mutual funds for investors looking for high returns.
Why Invest:
- Actively managed for strong returns
- Focus on high-quality growth stocks
- Well-diversified across sectors
Conclusion
Investing in small-cap mutual funds offers substantial potential for long-term growth, especially if you choose the right funds. The best small cap mutual funds for 2025 are those that combine diversification, low costs, and a skilled management team. Whether you prefer passive or active management, there are options to suit your investment goals.