Drawdown

A drawdown is the peak-to-trough decline of a portfolio or asset during a specific period, usually expressed as a percentage. Maximum drawdown measures the worst peak-to-trough drop ever observed. Drawdown is often a better practical measure of risk than volatility because it reflects the actual pain investors experience. The 2008 bear market produced a peak drawdown of about 55% for the S&P 500; the 2020 COVID crash produced a 34% drawdown in just 33 days.