Explained: What is quartile ranking in mutual funds and how to analyse schemes using this ranking
Quartile ranking is a statistical tool used to evaluate and compare the performance of mutual funds within a specific category. It divides funds into four quartiles based on their performance over a defined period. The rankings are typically based on returns, with the first quartile (Q1) representing the top 25% of funds and the fourth quartile (Q4) representing the bottom 25%.
How quartile ranking works
Mutual funds in the same category are ranked from best to worst based on their returns. These rankings are then divided into four equal parts:
- First quartile (Top 25%): The best-performing funds in the category.
- Second quartile (25%-50%): Funds that perform better than half but are not the best.
- Third quartile (50%-75%): Below-average performers but not the worst.
- Fourth quartile (Bottom 25%): The lowest-performing funds in the category.
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View Details» <div data-placement=«Mid Article Thumbnails» data-target_type=«mix» data-mode=«thumbnails-mid» style=«min-height:400px; margin-bottom:12px;» class=«wdt-taboola» id=«taboola-mid-article-thumbnails-118798103»>A fund's quartile ranking is an important indicator of how well it has performed relative to its peers over a given timeframe, such as one year, three years, five years or across any longer horizon.
How to analyze mutual funds using quartile ranking
While quartile ranking is a useful metric, investors should consider the following factors when analyzing mutual funds:
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