Small-cap funds are believed to have higher growth potential. Small-cap funds are a good choice for investors seeking diversification across different sectors and companies. Investors with a high risk appetite should invest in these funds. Small-cap funds generally invest in companies having market cap lower than $2 billion. The companies, smaller in size, offer growth potential and their market capitalization may increase subsequently. As for growth funds, when capital appreciation over the long term takes precedence over dividend payouts, these funds become a natural choice for investors. These funds focus on realizing an appreciable amount of capital growth by investing in stocks of firms whose value is projected to rise over the long term.

Below we will share with you 5 top rated small-cap growth mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all small-cap growth funds, investors can click here to see the complete list of funds.

Fidelity Advisor Small Cap Growth A (FCAGX – MF report) invests a large share of its assets in small cap companies. It invests in both domestic and foreign companies which the Fidelity Management & Research Company (FMR) believes have higher than average growth potential. It applies fundamental analysis including issuer's financial and economic conditions to select investments. The fund has returned 3.6% over the last one year.

The fund manager is Patrick Venanzi and has managed this fund since 2011.

BlackRock Small Cap Growth Equity Investor A (CSGEX – MF report) seeks long term capital growth. It invests a major portion of its assets in small cap equity securities located in the U.S. The market capitalizations of these companies are identical to the size of the companies listed in the Russell 2000 Index or S&P SmallCap 600 Index. The fund has returned 1.8% over the last one year.