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  1. Knowledge
  2. ›Glossary
  3. ›Maximum Drawdown

Risk

Maximum Drawdown

The maximum drawdown is the largest percentage loss from a peak to the subsequent trough.

The maximum drawdown (MDD) is the largest fall in the value of a portfolio or security from its highest point to the subsequent lowest point, before a new high is reached.

Historical maximum drawdowns for global equities: the 2008 financial crisis around –57 %, the 2000 dotcom crash around –54 % and the 2020 COVID crash around –34 %.

The MDD is a more tangible risk measure than volatility, because it shows how much an investor could actually have lost. It helps gauge whether one's own risk tolerance genuinely fits the portfolio.

Related terms

VolatilityDiversificationReturn/Yield

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