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Small-cap stocks, as a whole, have not performed well so far in 2015. The Russell 2000 Index, a collection of 2000 small-cap stocks, is down 3.5% year-to-date through October 23. By comparison, the S&P 500 Index, which includes large-caps, was down approximately 1.5% through the same period.
|YTD Return||5-Year Avg. Returns||10-Year Avg. Returns||Expense Ratio (Gross)|
|Emerald Growth Fund Investor Class (FFGRX)||4.7%||17.3%||9.2%||1.3%|
|Oberweis Small-Cap Opportunities (OBSOX)||9.8%||13%||6.2%||2.1%|
|Wasatch Core Growth (WGROX)||5.1%||14.9%||7.3%||1.1%|
The main reason these funds have performed so well despite a relatively poor climate for small-cap stocks in general is that they have opportunistically taken advantage of high-growth sectors of the economy. For example, these funds hold higher-than-average allocations to the health care and financial services sectors, which have seen rising growth over the past several years. The Emerald Growth Fund (FFGRX) allocates 22% of its assets to health care and another 15% to financial services. In fact, healthcare is the highest market sector allocation for the Oberweis Small-Cap Opportunities Fund (OBSOX), at 27%.
The three small-cap funds mentioned above have outperformed the Russell index, but the funds charge relatively high fees that directly detract from performance. But there are many solid small-cap mutual funds that do not charge such high fees. For example, one mutual fund that has performed well so far in 2015 and offers a more competitive expense ratio is the Fidelity Small Cap Growth Fund (FCPGX). This fund returned 3.4% to investors year-to-date through September 30. This fund charges a 0.9% annual expense ratio, which beats its peer category of 1.3%.
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