Risk
What is Maximum Drawdown?
Maximum drawdown measures the largest peak-to-trough decline in a portfolio's value, showing the worst-case loss an investor would have experienced.
Formula
Max Drawdown = (Trough Value - Peak Value) ÷ Peak Value × 100
How to Interpret
Lower drawdowns indicate more stable portfolios. A 50% drawdown requires a 100% gain to recover, making drawdown management critical.
Typical Ranges
Below 20% for conservative portfolios. Below 35% for aggressive. Above 50% is severe.