Best Small Cap Mutual Funds for Long-Term Growth: A Comparative Analysis

For investors seeking exposure to undervalued securities with substantial growth potential, small-cap value mutual funds represent a compelling opportunity. These investment vehicles focus on companies with market capitalizations under $2 billion that trade below their intrinsic value, offering a strategic approach to portfolio diversification and wealth accumulation over extended time horizons.

Understanding the Small-Cap Value Advantage

Small-cap value investing combines two powerful strategies: value investing principles with the higher growth trajectory of smaller enterprises. By targeting stocks trading at discounts to book value with favorable price-to-earnings ratios and attractive dividend yields, these best small cap mutual funds appeal to investors with considerable risk tolerance. The category delivers sector diversification while capturing the upside potential that established large-cap companies may lack.

Comparing Three Top Performers

When evaluating the best small cap mutual funds for long-term wealth building, three standout options merit attention based on their recent track records and strategic positioning:

Invesco Small Cap Value (VSCAX) has demonstrated exceptional performance, posting a three-year annualized return of 21.7%. The fund pursues long-term capital appreciation by concentrating its assets in undervalued equities of small-cap enterprises, primarily through common stock positions. Jonathan Mueller has guided the fund’s strategy since June 2010, bringing consistency to its management approach.

FPA Queens Road Small Cap Value (QRSVX) delivered a three-year annualized return of 13.4%, investing predominantly in equity securities—including common, preferred, and convertible stocks—of small-cap U.S. corporations. As of August 2025, the fund maintained a diversified portfolio of 50 holdings, with Fabrinet representing 4.4% of total assets.

DFA US Targeted Value (DFFVX) rounds out this trio with a three-year annualized return of 12.6%. The fund’s approach centers on identifying readily marketable securities across U.S. small and mid-cap companies that display strong profitability characteristics. With an expense ratio of just 0.29%, DFFVX offers cost-efficient exposure to value-oriented smaller enterprises.

Key Takeaways for Long-Term Investors

Selecting among the best small cap mutual funds requires balancing return potential against risk tolerance and investment timeline. Each of these options—VSCAX, QRSVX, and DFFVX—provides distinct exposure to the small-cap value segment while maintaining the diversification benefits essential for prudent portfolio construction. Performance histories, management continuity, and expense ratios collectively distinguish these funds as noteworthy vehicles for building long-term wealth through disciplined value investing.