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Quartile Rankings
Quartile rankings are used to compare returns of funds in the same category. These rankings are published widely in newspapers and a number of financial Web sites.
Mutual funds are broken down into over 30 categories by the Investment Funds Standards Committee, which is made up of media representatives, analysts and data publishers. This classification makes it easier to compare funds with similar features.
Each category is divided into four equal parts or quartiles. For instance, if a given category has 100 funds, each quartile will be made up of 25 funds. The 25 funds with the highest returns will belong to the first quartile, the next best 25 funds to the second quartile and so on.
Classification by quartiles is based on the reporting periods that are generally used to calculate fund returns: 6 months, 1 year, 3 years, 5 years and 10 years.
It is not advisable to give too much importance to quartile ranking over short horizons such as six months or one year. Fund comparisons should rather be based on longer-term rankings (3 years or more).
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