Drawdown
The decline of an investment from its last peak to the following low, usually in percent.
In short
As of 8 October 2026A drawdown is the decline of an investment from its last peak to the following low, usually given in percent. The maximum drawdown is the largest decline within a period. If a portfolio falls from 20,000 to 14,000 euros, the drawdown is 30 %. After a 50 % loss, it takes a 100 % gain to get back to the previous level.
A drawdown measures how far an investment has fallen from its high. The maximum drawdown is the largest such fall within a period. It shows better than volatility how much a bad phase can actually hurt.
Recovery time matters too: after a 50 % loss you need a 100 % gain to get back to where you were. In the 2007 to 2009 financial crisis the MSCI World lost more than half its value, and in the Covid crash the DAX fell almost 40 %. How long such phases lasted is shown in the DAX return triangle.
Example: your portfolio rises to 20,000 euros and then falls to 14,000 euros. The drawdown is 30 %. Asking yourself in advance whether you could sit through such a loss helps you match your asset allocation to your risk tolerance.
As of 8 October 2026 · Educational content, not investment or tax advice.