Strong-performing funds that focus on smaller U.S. stocks

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We are looking for well-performing small- and mid-cap U.S. equity funds

With the uncertainty of the U.S. election behind us, Canadian investors can refocus their attention on their financial goals. Today, we turn our efforts to small- and mid-cap stocks in the U.S. markets.

I screened this universe on two factors: the Morningstar Rating for Funds , which is an objective look-back of risk-adjusted returns after fees, relative to the other funds in the category, and the Morningstar Medalist Rating, which is our analysts’ assessment of the funds’ people ; process ; and parent . Funds that receive a medalist rating of gold, silver or bronze are those that Morningstar predicts will product positive alpha after fees relative to peers.

Though the results look quite spectacular over the recent past, it is important to note again the volatility of these types of investments. Investors are urged to consider their ability to take on risk. As an example, those who are at or close to retirement might consider steering clear or allocating a very small portion of their portfolio to volatile investments, while a younger investor who is starting the journey might be able to afford to take on a larger allocation to risky investment.

 

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