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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 might mean top 50%, or a decile of one would mean top 10%. This type of ranking may be used to determine the quality of investments or the rankings of schools.

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 their performance against other funds. So a decile rank of two would usually mean that the mutual fund was in the top 20% on 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 in a year were low performing months, unless all other mutual funds also performed poorly in that same 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 of a month, year, two years, and et cetera?

Longer lengths of time can be a little deceiving though, because performance is averaged over that length of time. A mutual fund could perform really well half the year, and then have taken a sudden dip in performance that may not be reflected tremendously in rank. Knowing how a fund currently compares to other funds, and how it has performed over time help you to understand if you are making a good investment.

It also helps to know what types of funds are being compared, since many have different investment strategies. Sometimes all mutual funds are compared without this consideration, which is called an all rank. Other times, only mutual funds that have the same type of investment strategies are measured against each other, called an objective rank.

You’ll also note the concept of decile rank when people discuss ranking schools. In this case, the ranking may be positive or negative, depending upon what is being compared. For instance, schools might be ranked by decile based on percentage of children being educated who are English language learners or who have a low socioeconomic status. In this case, the top rankings of one or two might mean that the school has a very high percentage of kids of this type, rather than a low percentage.