U.S. stocks showed resilience and strong performance lately as investors balanced geopolitical risks with solid earnings and economic data. Technology stocks, especially AI-driven chipmakers, continue to power the rally. Periodic improvements in investor sentiment have been fueled by hopes of easing tensions in the Middle East, along with a strong start to the first-quarter earnings season. Cooling volatility, reflected in the CBOE Volatility Index, also supported the risk appetite.
However, markets remained sensitive to ongoing uncertainty around U.S.-Iran tensions and fluctuating oil prices. Economic data painted a mixed picture, with inflation largely in line with expectations but consumer sentiment dropping to very low levels. Manufacturing and housing data were also uneven. While easing geopolitical concerns and strong earnings helped lift markets, renewed tensions later in the period caused some pullback.
In such volatile market conditions, investors with reasonably high-risk appetite can invest in small-cap value funds now for lower valuations, rebound potential and diversification, especially as economic recovery and rate stability support smaller companies’ growth.
Small-cap value funds like Invesco Small Cap Value Fund VSCAX, Goldman Sachs Small Cap Value Insights Fund GSATX, Bridgeway Omni Small Cap Value Fund BOSVX, Nuveen Small Cap Value Opportunities Fund NSCAX and Fidelity Advisor Small Cap Value Fund FCVAX are good choices for investors seeking diversification across different sectors and companies. These funds have the majority of their investments in sectors such as retail, technology, finance and industrial cyclical, which will help investors in long-term growth and wealth creation.
Small-cap value mutual funds provide excellent choices for investors looking for bargains, i.e., stocks at a discount, with impressive growth potential. Small-cap funds are a good choice for investors with a high-risk appetite, as companies with small-market capitalizations are expected to have higher growth potential than large- and mid-cap companies. Small-cap funds generally invest in companies having a market cap of less than $2 billion. Also, small-cap funds are expected to provide diversification across different sectors and companies.
Value mutual funds are those that invest in stocks that are trading at discounts to book value, have a low price-to-earnings ratio and have high dividend yields. Value investing is always a very popular strategy, and for good reason. After all, who doesn’t want to find stocks that have low PEs, solid outlooks, and decent dividends?
Mutual funds, in general, reduce transaction costs and diversify their portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have, thus, selected five small-cap value mutual funds that have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.
Invesco Small Cap Value Fund invests most of its assets, along with borrowings, if any, in common stocks of small-capitalization companies and derivative instruments with similar economic characteristics. VSCAX advisors choose to invest in companies that, according to them, are undervalued.
Jonathan Mueller has been the lead manager of VSCAX since June 25, 2010. Most of the fund’s exposure was in companies like Coherent (4%), Western Alliance Bancorporation (2.7%) and MKS (2.5%) as of Oct. 31, 2025.
VSCAX’s three-year and five-year annualized returns are 25.6% and 18%, respectively. VSCAX has an annual expense ratio of 1.05%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Goldman Sachs Small Cap Value Insights Fund invests most of its assets, along with borrowings, if any, in a broadly diversified portfolio of small-cap companies. GSATX advisors also invest in foreign issuers traded in the United States.
Joseph Kogan has been the lead manager of GSATX since Feb. 29, 2024. Most of the fund’s investments were in companies like TTM Technologies (1.2%), Ormat Technologies (1.1%) and Hecla Mining (1%) as of Oct. 31, 2025.
GSATX has three-year and five-year annualized returns of 15.3% and 8%, respectively. GSATX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 1.2%
Bridgeway Omni Small Cap Value Fund invests most of its assets, along with borrowings, if any, in a broad and diverse group of small-cap stocks that are listed on the New York Stock Exchange, the NYSE American and the Nasdaq at the time of purchase. BOSVX advisors generally invest in value stocks.
Andrew Berkin has been the lead manager of BOSVX since June 30, 2024. Most of the fund’s investments are in companies like Victoria’s Secret (1.1%), Sphere Entertainment (1%) and Peabody Energy (1%) as of Dec. 31, 2025.
BOSVX has three-year and five-year annualized returns of 14.8% and 10%, respectively. BOSVX has an annual expense ratio of 0.47%.
Nuveen Small Cap Value Opportunities Fund invests most of its assets, along with borrowings, if any, in equity securities of companies with market capitalization similar to the companies listed on the Russell 2000 Value Index or the Standard & Poor’s SmallCap 600 Index at the time of purchase. NSCAX advisors can also invest a small portion of its assets in foreign issues, including those from emerging market countries.
Andrew C Hwang has been the lead manager of NSCAX since Feb. 1, 2016. Most of the fund’s investments are in companies like Vicor Corporation (2.9%), Seacoast Banking Corporation of Florida (2.7%) and Flowserve (2.6%) as of Dec. 31, 2025.
NSCAX has three-year and five-year annualized returns of 14.7% and 8.9%, respectively. NSCAX has an annual expense ratio of 1.2%.
Fidelity Advisor Small Cap Value Fund invests most of its net assets in common stocks of domestic and foreign value-oriented companies with small market capitalizations. FCVAX advisors invest in companies that it believes to are undervalued based on metrics like assets, sales, earnings, growth potential, or cash flow, compared to other companies in the same industry.
Gabriela Kelleher has been the lead manager of FCVAX since May 1, 2021. Most of the fund’s investments are in companies like Old National Bancorp (2.6%), AXIS Capital Holdings (2.2%) and Compass (2.2%) as of Jan. 31, 2026.
FCVAX has three-year and five-year annualized returns of 11.4% and 6.6%, respectively. FCVAX has an annual expense ratio of 1.2%.
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