Maximum drawdown
The largest percentage fall from a peak to a subsequent trough over a selected period.
Plain languagePractical exampleConnected reading
01
What is it?
The largest percentage fall from a peak to a subsequent trough over a selected period.
02
Why does it matter?
It shows the depth of historical loss an investor could have faced.
03
How should it be read?
State the period, currency, reinvestment assumption and data frequency.
04
Common mistake
Treating historical maximum drawdown as a cap on future losses.
A simple example
A fall from 100 to 65 is a 35% drawdown if no new peak intervenes.