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. Meanwhile, value stocks are stocks that tend to trade at a price that is lower than its fundamentals (i.e. earnings, book value, Debt-Equity). It is common for some investors to invest in value funds for the income or yield. However, not all value funds are comprised solely of companies that primarily use their earnings to pay dividends. Investors interested in choosing value funds for yield, should be sure to check the mutual fund yield. The mutual fund yield is the dividend payments divided by the value of the mutual fund’s shares.

Below we will share with you 5 small cap value mutual funds. Each fund has earned a Zacks #2 Rank (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 value funds, investors can click here to see the complete list of funds.

Glenmede Small Cap Equity Advisor (GTCSX - MF report) seeks capital growth over the long run. GTCSX invests a lion’s share of its assets in equity securities of domestic companies that are believed to be undervalued. GTCSX invests in firms having market capitalization similar to those included in the Russell 2000 Index. The Glenmede Small Cap Equity Advisor fund has a three-year annualized return of 23.2%.

As of January 2015, GTCSX held 99 issues with 1.99% of its assets invested in Maximus Inc.

Northern Small Cap Value (NOSGX - MF report) invests a major portion of its assets in companies having market capitalizations within the universe of the Russell 2000 Value Index. NOSGX may focus on a specific sector like finance in managing its investment goal. Companies that are included in NOSGX’s portfolio generally pay low or no dividends. The Northern Small Cap Value fund has a three-year annualized return of 19.7%.

Robert H. Bergson is the fund manager and has managed NOSGX since 2001.

Deutsche Small Cap Value A (KDSAX - MF report) seeks long-term capital growth. KDSAX invests a majority of its assets in value stocks of domestic companies having market cap size identical to those listed in the Russell 2000 Value Index. KDSAX may also invest a maximum of 20% of its assets in non-US firms. The Deutsche Small Cap Value A fund has a three-year annualized return of 18%.

KDSAX has an expense ratio of 1.19% as compared to category average of 1.34%.

Invesco Small Cap Value A (VSCAX - MF report) invests a large chunk of its assets in small cap companies and derivatives that are economically similar to these securities. VSCAX mainly invests in common stocks of undervalued companies. The Invesco Small Cap Value A fund has a three-year annualized return of 25.9%.

As of March 2015, VSCAX held 67 issues with 4.98% of its assets invested in Alere Inc.

Columbia Small Cap Value Fund II A (COVAX - MF report) seeks capital growth over the long-term. COVAX invests heavily in companies that are believed to be undervalued and have market cap size within the range of the Russell 2000 Value Index. COVAX invests not more than one-fifth of its assets in foreign companies. COVAX focuses on acquiring common stocks of companies and a little portion of its assets may get invested in REITs. The Columbia Small Cap Value Fund II A fund has a three-year annualized return of 20.4%.

COVAX has an expense ratio of 1.30% as compared to category average of 1.34%.

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