Risk taking investors, who give precedence to capital appreciation over dividend payouts, may consider small-cap growth mutual funds to derive healthy returns. These funds focus on realizing an appreciable amount of capital growth by investing in stocks that are projected to rise in value over the long term.

Meanwhile, small-cap funds are good choices for investors seeking diversification across different sectors and companies. 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. Also, due to their less international exposure, small-cap funds offer higher protection than their large- and mid-cap counterparts against any global downturn.

Below we share with you five top-rated, small-cap growth mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and we expect the fund to outperform its peers in the future. Investors can click here to see the complete list of small-cap growth funds to view their Zacks Rank and past performance.

Brown Advisory Small-Cap Growth Investor (BIASX - MF report) invests a large chunk of its assets in equity securities of small-cap companies domiciled in the U.S. BIASX focuses on acquiring securities of companies that are believed to have strong growth prospects. Brown Advisory Small-Cap Growth Investor has a three-year annualized return of 10.3%.

Christopher A. Berrier is the fund manager of BIASX since 2006.

T. Rowe Price QM US Small-Cap Growth Equity (PRDSX - MF report) seeks capital appreciation over the long run. PRDSX invests a lion’s share of its assets in securities of growth oriented companies with small size market capitalizations. Though PRDSX primarily focuses on acquiring securities of domestic companies, it may also invest not more than 10% of its assets in securities of companies located in foreign lands. T. Rowe Price QM US Small-Cap Growth Equity has a three-year annualized return of 9.9%.

As of March 2016, PRDSX held 292 issues, with 1.15% of its assets invested in Domino's Pizza Inc.

Hartford Small Cap Growth HLS IB (HBSGX - MF report) invests a major portion of its assets in common stocks of small-cap companies. HBSGX looks for companies that are expected to have above-average growth prospects. HBSGX may also invest a maximum of 25% of its assets in non-U.S. securities. Hartford Small Cap Growth HLS IB has a three-year annualized return of 7.8%.

HBSGX has an expense ratio of 0.90% as compared to the category average of 1.31%.

TCM Small Cap Growth (TCMSX - MF report) seeks growth of capital over the long term. TCMSX invests a large share of its assets in companies having market capitalizations similar to those listed in the Russell 2000 Index. TCM Small Cap Growth has a three-year annualized return of 9.4%.

Richard J. Johnson is the fund manager of TCMSX since 2004.

Putnam Small Cap Growth A (PNSAX - MF report) invests in common stocks of companies having market capitalizations within the range of the Russell 2000 Growth Index.  PNSAX invests in securities of companies whose earnings growth is expected to outpace the same of its peers. Putnam Small Cap Growth A has a three-year annualized return of 5.1%.

PNSAX has an expense ratio of 1.21% as compared to the category average of 1.31%.