Glossary · Risk
Maximum drawdown
The largest peak-to-trough fall over a period — the worst loss a holder would have sat through.
Drawdown is measured from the highest point reached to the lowest point that followed it, before a new high. Unlike volatility, it describes a specific historical experience rather than an average.
It is bounded by the window observed. A five-year drawdown figure cannot capture a crash that happened six years ago, so the window matters as much as the number.
Recovering a drawdown takes a larger percentage gain than the percentage lost: a 33% fall requires a 50% rise to return to the starting point.
How we calculate it
Largest peak-to-trough fall in our weekly closing prices, in pounds, over 1, 3 and 5 years.
The full method, with a worked exampleRelated terms
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Definitions describe how a term is used on Fundology. This is information, not advice.