JRB U.S. Small- and Mid-Cap Funds


What Are Mid-Cap and Small-Cap Companies?

Mid-cap funds generally have a market capitalization of $2 - $10 billion and include companies such as Alaska Airlines, Autozone, Domino’s Pizza, Hershey’s and Under Armour. Small-cap companies generally have market capitalization below $2 billion and include companies such as Dave and Buster’s Entertainment, La-Z-Boy, Fitbit and Wintrust Financial Corporation. Fund managers look for small- and mid-cap companies that are poised for dramatic growth. Zoom Video Communications is an excellent example of a small-cap company that quickly grew to large-cap status.

What Role Do Small- and Mid-Cap Funds Play in Your Portfolio?

Small- and mid-cap funds play an important role in diversifying your portfolio. Over the long-term, these funds tend to generate larger returns than large-cap funds though they also carry greater volatility during declining markets.

Viewing model asset allocation portfolios demonstrates the importance of small- and mid-cap investments for conservative investors as well as more aggressive investors. The model portfolios suggest that even conservative investors in their 30s and 40s should have 9%-18% of their portfolio committed to small- and mid-cap investments. For aggressive investors, the range is 20%-25%.

This article compares the five small- and mid-cap funds the JRB offers. We review:

  • The goals and objectives of each fund
  • The investment style of each fund (growth, value or blend)
  • The management strategy of each fund (active or passive)
  • The Morningstar ratings for each fund (overall rating, returns, expenses, and risk compared to other funds in the same class)
  • The total 1-, 3-, 5- and 10-year returns for each fund

T. Rowe Price Mid-Cap Value Fund (TRMCX)

The T. Rowe Price Mid-Cap Value Fund, an actively managed investment option, invests primarily in U.S. mid-sized companies that appear to be undervalued. In practice, this means that 80% of the Fund’s assets are invested in companies included in the S&P MidCap 400 Index or the Russell Midcap Value Index. Management looks for companies that (potentially) have attractive profits and/or cash flow, a sound balance sheet, capable management, management or employee stock ownership and/or a low stock price relative to earnings or net assets.

The Russell Midcap Value Index is the benchmark for the fund.

MORNINGSTAR® RATINGS (as of 2/28/2021)

OVERALL RATING1: (compared to other funds in the Morningstar® mid-cap, value category) ★★★★

RETURNS2 (compared to other funds in the Morningstar® mid-cap, value category)

 

 

 

 

 

Low

 

Average

 

High

EXPENSES3 (compared to other funds in the Morningstar® mid-cap, value category))

 

 

 

 

 

Low

 

Average

 

High

RISK4 (compared to other funds in the Morningstar® mid-cap, value category))

 

 

 

 

 

Low

 

Average

 

High

Total Returns (as of 3/31/2021)

1-Year Return3-Year Returns5-Year Returns10-Year Returns
+76.23% +10.60% +11.87% +10.93%

T. Rowe Price Mid-Cap Value Fund Fact Sheet

T. Rowe Price Mid-Cap Value Fund Prospectus


Fidelity Low-Priced Stock Fund (FLPSX)

The Fidelity Low-Priced Stock Fund seeks capital appreciation and is actively managed. It normally invests at least 80% of its assets in both growth and value stocks whose share price is at or below $35 per share or whose earnings equal or surpass the median earnings of other companies in the Russell 2000 Index. Focusing on low-priced stocks often leads to investments in small- and medium-sized companies. The Fund invests in both U.S. and foreign stocks.

The Russell 2000 Index serves as the benchmark for the Fund.

MORNINGSTAR® RATINGS (as of 2/28/2021)

OVERALL RATING1: (compared to other funds in the Morningstar® mid-cap, value category) ★★★★★

RETURNS2 (compared to other funds in the Morningstar® large-cap/blend category)

 

 

 

 

 

Low

 

Average

 

High

EXPENSES3 (compared to other funds in the Morningstar® mid-cap, value category)

 

 

 

 

 

Low

 

Average

 

High

RISK4 (compared to other funds in the Morningstar® mid-cap, value category)

 

 

 

 

 

Low

 

Average

 

High

Total Returns (as of 3/31/2021)

1-Year Return3-Year Returns5-Year Returns10-Year Returns
+72.91% +12.15% +12.65% +11.38%

Fidelity Low-Priced Stock Fund Fact Sheet

Fidelity Low-Priced Stock Fund Prospectus


Goldman Sachs Small/Mid Cap Growth Fund (GTMTX)

This actively managed, growth-oriented fund seeks long-term capital appreciation by investing primarily in companies included in the Russell 2000 Growth Index and the Russell Midcap Growth Index. The Fund invests primarily in publicly traded U.S. companies although it can invest up to 25% of net assets in foreign securities, including those in emerging markets. Up to 20% of the fund’s net assets can be invested in fixed income securities. Fund managers seek investments in high-quality businesses with the potential for sustainable growth.

The benchmark for the Goldman Sachs Small/Mid Cap Growth Fund is the Russell 2500 Growth Index.

MORNINGSTAR® RATINGS (as of 2/28/2021)

OVERALL RATING1: (compared to other funds in the Morningstar® mid-cap, growth category) ★★★★

RETURNS2 (compared to other funds in the Morningstar® mid-cap, growth category)

 

 

 

 

 

Low

 

Average

 

High

EXPENSES3 (compared to other funds in the Morningstar® mid-cap, growth category)

 

 

 

 

 

Low

 

Average

 

High

RISK4 (compared to other funds in the Morningstar® mid-cap, growth category)

 

 

 

 

 

Low

 

Average

 

High

Total Returns (as of 3/31/2021)

1-Year Return3-Year Returns5-Year Returns10-Year Returns
+87.88% +24.72% +22.09% +15.50%

Goldman Sachs Small/Mid Cap Growth Fact Sheet

Goldman Sachs Small/Mid Cap Growth Prospectus


Loomis Sayles Small-Cap Value Fund (LSSCX)

As an actively managed, small-cap, value fund, this Loomis Sayles fund invests at least 80% of its net assets in companies making up the Russell 2000 Index. Managers look for smaller companies that have suffered significant business problems but are believed to have favorable prospects for recovery as well as companies that are not yet well-known but are considered to have favorable prospects and attractive valuation. Up to 20% of assets may be invested in foreign companies.

The Russell 2000 Index is the benchmark for the Loomis Sayles Small Cap Value Fund.

MORNINGSTAR® RATINGS (as of 2/28/2021)

OVERALL RATING1: (compared to other funds in the Morningstar® small-cap, value category) ★★

RETURNS2 (compared to other funds in the Morningstar® small-cap, value category)

 

 

 

 

 

Low

 

Average

 

High

EXPENSES3 (compared to other funds in the Morningstar® small-cap, value category)

 

 

 

 

 

Low

 

Average

 

High

RISK4 (compared to other funds in the Morningstar® small-cap, value category)

 

 

 

 

 

Low

 

Average

 

High

Total Returns (as of 3/31/2021)

1-Year Return3-Year Returns5-Year Returns10-Year Returns
+80.67% +8.55% +11.04% +9.81%

Loomis Sayles Small-Cap Value Fund Fact Sheet

Loomis Sayles Small-Cap Value Fund Prospectus


Fidelity Extended Market Index Fund (FSMAX)

A passively managed, index fund, the Fidelity Extended Market Index Fund seeks returns that approximate the total return of small- to mid-cap U.S. stocks. The Fund normally invests at least 80% of its assets in companies included in the Dow Jones U.S. Completion Total Stock Market Index. This index represents the performance of small- to mid-cap U.S. companies.

The benchmark for the Fund is the Dow Jones U.S. Completion Total Stock Market Index.

MORNINGSTAR® RATINGS (as of 2/28/2021)

OVERALL RATING1: (compared to other funds in the Morningstar® mid-cap, blend category) ★★★★★

RETURNS2 (compared to other funds in the Morningstar® mid-cap, blend category)

 

 

 

 

 

Low

 

Average

 

High

EXPENSES3 (compared to other funds in the Morningstar® mid-cap, blend category)

 

 

 

 

 

Low

 

Average

 

High

RISK4 (compared to other funds in the Morningstar® mid-cap, blend category)

 

 

 

 

 

Low

 

Average

 

High

Total Returns (as of 3/31/2021)

1-Year Return3-Year Returns5-Year Returns10-Year Returns
+97.89% +18.16% +18.00% +13.15%

Fidelity Extended Market Index Fund Fact Sheet

Fidelity Extended Market Index Fund Prospectus


Conclusion

While small- and mid-cap investments play a role in any retirement portfolio, they are especially important for those younger than 50-years-old. Most younger savers need the higher returns these investments have offered historically to meet their financial goals. At the same time, the longer time frame provides the opportunity to recover from short-term volatility.

It is also solid practice for a retirement investor to diversify their holdings within this important asset class. The JRB offers an excellent range of high-quality, small- and mid-cap investment options to meet your savings needs. Please contact us at 888-JRB-FREE (572-3733) or send us an email to discuss your asset allocation or any other investment question you have.

 

Updated May 2021

 


1 The Morningstar Overall Rating™ for funds, or "star rating," is calculated for funds with at least a three-year history. The Morningstar Rating is calculated from a weighted average of its three-, five- and 10-year (if applicable) Morningstar Rating metrics. The top 10% of products in each product category receive 5 stars.

2 The Morningstar® Return Rating is a measure of a fund's risk-adjusted return, relative to similar funds. Funds are rated from 1 to 5 green boxes, with the best performers receiving 5 green boxes and the worst performers receiving a single green box. The 10% of funds in each category with the highest risk-adjusted return receive 5 green boxes, the next 22.5% receive 4, the middle 35% receive 3, the next 22.5% receive 2, and the bottom 10% receive 1 green box.

3 The Morningstar® Expenses Rating compares each fund's net expense ratio to the net expense ratio of all of the other funds within its Morningstar® Category grouping. Funds are rated from 1 to 5 green boxes, with the best performers receiving 5 green boxes and the worst performers receiving a single green box. The 10% of funds in each category with the highest risk-adjusted return receive 5 green boxes, the next 22.5% receive 4, the middle 35% receive 3, the next 22.5% receive 2, and the bottom 10% receive 1 green box.

4 The Morningstar® Risk Rating is based on a fund's past performance compared to other funds in its Morningstar® category. It compares the fund's total return to the risk adjusted return (factoring market volatility into the risk assessment). In the risk rating process, 10% of a category's funds with the lowest measured risk are rated as low risk. The next 22.5% are rated below average, the middle 35% are average, the next 22.5% above average, while the top 10% are rated as high risk. Morningstar measures risk for as many as three periods (three, five, and 10 years). These separate measures are then weighted and averaged to produce an overall measure for the fund.