Glossary
Drawdown: meaning, example and why it matters
The fall from a peak value to a later low, usually shown as a percentage. Maximum drawdown is the largest such fall over a period and shows how painful the worst stretch was.
Worked example
A portfolio that peaks at ₹10,00,000 and falls to ₹7,50,000 has a drawdown of 25%. Getting back to the peak needs a rise of 10 ÷ 7.5 − 1 = 33.3%.
Illustrative numbers for explanation only. They are not market data, a forecast or a suggestion.
Why it matters
Drawdown shows how deep a fall was from the previous high, which is how it felt to hold the investment.
Related terms
See it in practice
Frequently asked questions
Why does recovering a loss need a bigger percentage?
Because the gain is measured on a smaller base. A 25% fall needs a 33.3% rise to return to the starting value.
Is this page investment advice?
No. Drawdown is explained in general terms with illustrative numbers. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser.
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Educational content, not investment advice. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser. Spotted a mistake? Email marketdekho01@gmail.com.