Portfolio Risk & Return

Maximum Drawdown

The largest fall from a peak to a later low over the period measured, before a new high was reached. A maximum drawdown of −25% means that at the worst point, someone who had bought at the top was sitting on a quarter less than they started with. It is the most visceral risk figure there is, because it measures the stretch an investor actually has to live through, and it matters because losses compound unevenly: a 25% fall needs a 33% gain just to get back to even, and a 50% fall needs a 100% gain. Closer to zero is better. The catch is that it only knows its own history: a window that missed the last crash shows a shallow figure that the next one can easily exceed.

Educational information, not investment advice. See it applied across the screener →