Small- and Mid-Cap Alternatives for American Funds Fans
Good funds that can take the place of Smallcap World.
A version of this article appeared in the May 2007 issue of Morningstar's American Funds Fund Family Report, our monthly newsletter dedicated to helping American Funds investors find superior long-term investment opportunities. To review a risk-free trial issue, click here. Fund Family Reports on Fidelity and Vanguard Funds are also available.
All figures are as of May 15, 2007.
Investors looking for dedicated exposure to U.S. and non-U.S. small- and mid-cap stocks within the American Funds lineup have just one choice: American Funds Smallcap World (SMCWX). Every other equity fund from American has at least 75% of its assets stashed in large caps. And while it's true that both asset bloat and large caps' arguably more appealing valuations (after small caps' seven-year rally) have something to do with that heavy emphasis on behemoths, those funds have long invested that way. Even in March 2000--just as the bull market peaked and smaller, cheaper stocks began their run--just two of American's 15 equity and balanced funds (other than Small Cap World) invested more than 45% of their equity portfolios in small- and mid-cap stocks.
Greg Carlson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.