Maximum drawdown: would you actually have held?
The biggest peak-to-trough fall an investment put you through — and why it predicts behavior better than any return number.
Maximum drawdown is the worst peak-to-trough fall an investment would have put you through over a period — the deepest the value dropped from a previous high before recovering. If $10,000 grew to $30,000, sank to $12,000, then climbed again, the max drawdown is the −60% plunge from $30,000 to $12,000, not the gentler fall measured from your original $10,000.
Why it's measured from the peak
Because that's what you actually felt. Once your account has hit $30,000, that number becomes the new reference point in your head — watching it fall to $12,000 is a 60% gut-punch, regardless of where you started. Drawdown captures the maximum pain along the way, which is precisely the thing that makes people sell at the worst possible moment.
Recovery time is half the story
A 60% drop that recovers in a year is a different experience from one that takes seven years to claw back. That's why this site reports both the depth of the deepest drop and, where it happened, the year the position first climbed back above its old peak. Long, grinding recoveries are where most investors quietly give up — selling near the bottom and missing the rebound that would have made the original numbers true.
Drawdown vs. volatility
Volatility (how much returns bounce around) and drawdown (the worst cumulative fall) are related but not the same. Volatility is statistical; drawdown is visceral. Two assets can share a volatility number while one merely fidgets and the other halves your money for three years. For predicting whether a real human would have stayed invested long enough to earn the headline return, drawdown is usually the more honest warning label.
You'll find the deepest-drop figure on every scenario's insight block — the wild ones are eye-opening. Compare a calm asset against a turbulent one, like Bitcoin vs. gold, or open a famously bumpy hub such as Bitcoin to see how big the falls really were.