In times of economic recovery small cap funds tend to do the best. Most investors want the best returns in their portfolio as they can obtain. Stock picking in small cap funds is more critical to getting handsome returns than large cap funds. In the early stages of an economic recovery and even well into the recovery small cap stocks outperform the total market.

I’m a big fan of no load funds. While there are some very good load funds out there you are going to have to get some very good management to overcome the load fee.

In the small cap arena good managers produce great results.

Royce Pennsylvania Mutual Fund, Symbol PENNX:

This is one of the oldest no load funds in the investment world. Since it’s inception in 1972 this fund has produced great returns year after year. This fund is run by Charles Royce. Over the last 35 years ending September 30, 2009 the fund is up 16.5% per year! Year to date this fund is up 30.84% as of September 30, 2009. Over the last ten years this fund is up 9.90% per year while the Russell 2000 index is only up 4.88%. This fund is absolutely incredible.

Royce Low-Priced Stock Fund Symbol RYLPX:

This is another great offering from Royce! This fund is run by Whitney George. This fund is up year to date ending September 30, 2009 44.65%! Over the last ten years this fund is up 12.02% per year while the Russell 2000 index is only up 4.88%. This fund is available through Fidelity as a no transaction fee fund. It is available at other brokerage houses and brokerage firms.

When it comes to small cap investing the people at Royce have it right. Nearly every fund in their lineup has beaten the market this year the three, five, ten, and even the thirty year periods.

There are other funds that do well besides Royce

Buffalo Small Cap Fund Symbol BUFSX.

This fund while it from time to time underperforms the market for short periods over the long hall performance has been stellar! Over the last 10 years is up 13.07%. This fund has only a $250 minimum purchase if held in an IRA. On May 27, 2009 this fund closed to new investors.

Intrepid Small Cap Fund Symbol ICMAX

This fund has only been around since October 2005 but over the last three years this fund is up almost 15% per year. During that same time frame the Russell 2000 was down almost 5%. This fund has a $2500 minimum for both IRA and non IRA investments.

An honorable mention goes out to the Perkins Small Cap Value Symbol JSCVX, up 10.33% per year over the last ten years.

The Gabelli Westwood Mighty Mites Fund Symbol WEMMX, up 8.60 % per year over the last ten years. This is a micro cap fund which invests in companies with a market cap of $300 million or less.

Having the best funds in the small cap arena can have a huge positive impact on your portfolio.