Decile rank is a number from 1 to 10 that corresponds to a percentage, used to determine investment quality or school rankings. It is a comparative rank, measuring performance against similar things over time. Understanding the time period and type of funds being compared is important. Decile grade can also be used for school rankings, with a higher score indicating a higher percentage of a certain group.
A decile rank is a single number on a scale of 1 to 10, which corresponds to a percentage, usually ten percentage points. For example, a decile of five could mean the top 50%, or a decile of one would mean the top 10%. This type of ranking can be used to determine investment quality or school rankings.
The decile rank is a comparative rank, where performance is measured against other similar things. For example, in mutual funds, each fund would receive a ranking based on its performance relative to other funds. So a decile of two usually means the mutual fund is in the top 20% of the rate of return. It might be considered a better investment than a mutual fund with a decile rank of three or four.
This comparison is made over time, so a mutual fund that has a good month or two of returns probably wouldn’t rank high if the rest of the months of a year were low-performing months, unless all of the other mutual funds also do well. investment have not performed poorly at that time. Usually, if you’re analyzing investments by decile rank, you want to understand the amount of time being discussed. Is the ranking the result of comparisons between one month, one year, two years, etc.?
However, longer periods of time can be a bit deceiving because performance is averaged over that period of time. A mutual fund might perform really well for half a year, and then have a sudden dip in performance that might not be reflected in rank tremendously. Knowing how a fund currently compares to other funds and how it has performed over time helps you understand if you’re making a good investment.
It also helps to know which types of funds are being compared, as many have different investment strategies. Sometimes all mutual funds are compared without this consideration, which is called all-rank. Other times, only mutual funds that have the same type of investment strategies are measured against each other, called target rank.
You will also notice the concept of decile grade when people discuss grading schools. In this case, the ranking can be positive or negative, depending on what is being compared. For example, schools could be ranked by decile based on the percentage of educated children learning the English language or having low socioeconomic status. In this case, the higher score by one or two could mean that the school has a very high percentage of such kids, rather than a low percentage.
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