Small-cap blend funds are a type of equity mutual funds that offer a mix of value and growth stocks, the market capitalization of which are generally lower than $2 billion. Blend funds are also known as “hybrid funds.” Blend funds aim for value appreciation by capital gains. These funds owe their origin to a graphical representation of a fund’s equity style box.

In addition to diversification, blend funds are great picks for investors looking for a mix of growth and value investment. Meanwhile, 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.

Below we will share with you four buy-rated small-cap blend mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future.

Vanguard Extended Market Index Investor (VEXMX - Free Report) uses an indexing investment approach by tracking the performance of the S&P Completion Index. This index generally includes a wide variety of small and mid-cap domestic companies. Vanguard Extended Market Index Investor has a one-year annualized return of 24.5%.

As of January 2017, VEXMX held 3,273 issues with 0.69% of its assets invested in Tesla Inc.

PIMCO StocksPLUS Small A (PCKAX - Free Report) maintains a portfolio by investing in fixed income securities related to the Russell 2000 Index including bonds and other derivatives to derive a higher return than the index. PCKAX invests in securities from public as well as private sectors issued worldwide. The fund focuses on investing in those fixed income instruments, which are actively managed by PIMCO. PIMCO StocksPLUS A returned 35% in the last one year.

PCKAX has an expense ratio of 1.09% compared with the category average of 1.22%.

T. Rowe Price Small-Cap Value (PRSVX - Free Report) seeks capital appreciation for the long run by investing the majority of its assets in companies with market capitalization within the range of the Russell 2000 Index. PRSVX may also invest in securities of companies located in foreign lands. Further, the fund may choose to sell its securities for reasons such as restrict losses and reallocate assets in other securities with higher prospects. T. Rowe Price Small-Cap Value has a one-year annualized return of 28.4%.

J. David Wagner is the fund manager of PRSVX since 2014.

Rydex Russell 2000 1.5x Strategy H (RYMKX - Free Report) primarily invests in securities of small-cap companies which are included on the Russell 2000 Index and in leveraged instruments. RYMKX seeks to consistently apply leverage to increase the fund's exposure to 150% of its benchmark index. The fund is non-diversified in nature. Rydex Russell 2000 1.5x Strategy H has returned 39.8% in the last one year.

RYMKX has an expense ratio of 1.70% compared with the category average of 2.02%.