Small-cap funds generally invest in companies with a market cap of less than $2 billion. The companies, smaller in size, offer growth potential, and their market capitalization may increase subsequently. Less international exposure makes small-cap funds less vulnerable to a stronger U.S. dollar.

Though small-cap stocks are believed to provide greater returns, they are also expected to be more volatile than large and mid-cap companies. Also, growth funds may experience more fluctuations than the other fund classes.

Risky investors who prefer capital appreciation over dividend payout may consider small-cap growth mutual funds. Growth funds focus on realizing an appreciable amount of capital growth by investing in stocks projected to rise in value over the long term. Meanwhile, small-cap funds are good for investors seeking diversification across different sectors and companies.

Below, we share with you three small-cap growth mutual funds, namely,  Invesco Discovery FundOPOCX,  Congress Small Cap Growth FundCSMVX and  Northern Small Cap Core FundNSGRX. 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 funds.

Invesco Discovery Fundinvests most of its net assets in common stocks of small-capitalization companies, which portfolio managers believe have favorable growth prospects. OPOCX advisors consider small-cap companies as those with market capitalization similar to those listed on the Russell 2000 Growth Index at the time of purchase.

Invesco Discovery Fund has three-year annualized returns of 15.9%. As of the end of August 2025, OPOCX had 101 issues, and 2.2% of its assets were invested in StepStone Group.

Congress Small Cap Growth Fundseeks long-term capital growth by investing most of its assets, along with borrowings, if any, in common stocks of small-cap companiesacross all sectors of the economy. CSMVX advisors define small-cap companies with market capitalizations equivalent to the companies listed on the Russell 2000 Growth Index at the time of purchase.

Congress Small Cap Growth Fund has three-year annualized returns of 14.4%. CSMVX has an expense ratio of 1.25%.

Northern Small Cap Core Fundaims to invest most of its assets, along with borrowings, if any, in equity securities of small-cap companies with market capitalization within the range of the market cap of companies listed on the Russell 2000 Index at the time of purchase. NSGRX invests in companies that retain their earnings to finance current and future growth and generally pay little or no dividends.