Risk & returns
A drawdown is the decline from a previous peak to a later value before a new peak is reached. It describes experienced loss from the high-water mark, not return from the original start.
Make it click
A walker reaches a summit, descends into a valley and later climbs again. The drawdown measures the depth below that summit until the summit is recovered.
Now put that into markets
Portfolio drawdown tracks cumulative value through time. Duration records how long the previous peak remains unrecovered.
Drawdowns depend on valuation frequency, currency, cash flows and whether income is included. A sequence can contain many overlapping peak-to-trough declines.
Inspect depth, duration and recovery together. Compare paths over the same period and return convention.
Historic drawdown is a realised path statistic, not a maximum future loss. Infrequent data can miss intraperiod damage.
Takeaway
