What is Drawdown?
The peak-to-trough decline of a portfolio or stock.
In Depth
Maximum drawdown measures the largest cumulative loss from a previous high. It's a critical risk metric: a portfolio that returns 20% annually but suffers a 50% drawdown is fundamentally different from one returning 15% with only a 15% drawdown. Recovering from a 50% drawdown requires a 100% subsequent gain.
Example
A portfolio that peaked at $100,000 and fell to $70,000 has a 30% drawdown.