π Maximum Drawdown Calculator
The worst peak-to-trough loss in a return series.
Maximum drawdown
Estimates for planning only, not financial advice.
Maximum drawdown is the worst loss an investor actually lived through: the deepest fall from a peak to the trough that followed. In the series 100, 110, 105, 120, 95, 108, 130, 112, the peak is 120 and the trough is 95, a 20.83 percent maximum drawdown. Recovering from it takes a 26.32 percent gain. This calculator finds the worst peak-to-trough decline in any value series you paste and shows the recovery math.
Drawdown is the risk measure investors feel. Volatility is abstract; watching a portfolio fall 20 percent from its high is visceral, and it is the experience that causes selling at bottoms. Any strategy evaluation that ignores drawdown is missing the human half of risk.
How to Use This Calculator
Paste portfolio values oldest first, separated by commas or line breaks. The calculator tracks the running peak, finds the worst decline, and reports the recovery gain needed.
Paste monthly or daily portfolio values, oldest first. More points give a truer maximum.
Read the maximum drawdown with its peak and trough values.
Note the recovery gain required. For return context on the same series, our average return calculator summarizes performance.
The Formula
The running peak is the key mechanic: each new high resets the reference, so only declines from the best point so far count. The recovery formula shows the asymmetry directly. A 20.83 percent drawdown needs 0.2083 / 0.7917 = 26.32 percent to get back, because the gain compounds on the smaller trough base.
The Recovery Asymmetry
| Drawdown | Gain to recover | Famous example |
|---|---|---|
| 10% | 11.1% | Normal correction |
| 20% | 25.0% | Typical bear market |
| 30% | 42.9% | 2020 COVID crash |
| 50% | 100.0% | 2000 to 2002, 2008 |
The table is the best argument for defense in investing. Avoiding large drawdowns matters more than capturing every rally, because the recovery math punishes depth exponentially. A portfolio that falls 50 percent must double just to break even, while one that falls 20 percent needs only a strong year. For growth projections that respect this reality, our compound interest calculator models the upside path.
Worked Example
With the defaults: values 100, 110, 105, 120, 95, 108, 130, 112. The running peak reaches 120 at the fourth point. The fifth point at 95 is a (120 - 95) / 120 = 20.83 percent drawdown. Later the peak resets to 130, and the final 112 is a (130 - 112) / 130 = 13.85 percent drawdown, smaller than the first. The maximum drawdown is therefore 20.83 percent, and recovering from 95 back to 120 requires a 26.32 percent gain.
Using Drawdown in Decisions
Size positions so that the strategy's historical maximum drawdown, doubled for safety, is a loss you can hold through without selling. That single rule prevents most behavioral disasters. Rebalance on schedule rather than on fear, since drawdowns are when rebalancing buys cheapest. And judge managers on drawdown relative to their benchmark: outperformance bought with double the drawdown is not skill, it is borrowing in disguise.
My rule: before buying any investment, ask what its worst historical drawdown was and whether you would have held through it. If the honest answer is no, buy less of it. Drawdown tolerance, not return hope, should set position size.
Drawdown and Position Sizing
Professional risk management starts from drawdown, not returns. The Kelly criterion and its half-Kelly practical cousin size bets so that the expected drawdown stays survivable. A common rule: never risk more than 1 to 2 percent of capital on a single idea, because ten consecutive losses then cost 10 to 20 percent, a recoverable drawdown, rather than the account.
Drawdown also governs fund survival. Investors redeem after large drawdowns, forcing managers to sell at the bottom, which is why funds with 30 percent drawdowns often close even when the strategy later recovers. The Calmar ratio, return divided by maximum drawdown, captures this: a strategy earning 12 percent with a 10 percent max drawdown (Calmar 1.2) is institutionally fundable, while 20 percent returns with a 40 percent drawdown (Calmar 0.5) is not. For the recovery math on any loss, our compound interest calculator shows the climb back.
Drawdown in Fund Marketing
Fund marketers love returns and bury drawdowns, so ask for the number directly. A credible manager discloses maximum drawdown, recovery time, and the market conditions behind both. Be wary of short track records: a three-year fund has not lived through a real stress event, and its stated max drawdown understates the risk.
Compare drawdowns across funds on the same basis, same period, same frequency of measurement. Monthly data hides intra-month pain that daily data reveals. And remember that backtested drawdowns are best-case: real trading adds slippage, fees, and the manager's own behavioral mistakes at the worst moments.
Estimates for planning only, not financial advice.Frequently Asked Questions
What is maximum drawdown?
The largest peak-to-trough percentage decline in a portfolio's value over a period. If a portfolio rises to $120 then falls to $95, the drawdown is (120 - 95) / 120 = 20.83 percent. Maximum drawdown is the worst such episode in the data, and it is the standard measure of downside risk.
How do you calculate maximum drawdown?
Track the running peak, and at each point compute the decline from that peak to the current value. The maximum of those declines is the answer. For the series 100, 110, 105, 120, 95, 108, the running peak hits 120 and the trough of 95 gives a 20.83 percent maximum drawdown. This calculator automates the running-peak logic.
Why does maximum drawdown matter more than volatility?
Volatility treats up and down moves symmetrically, but investors experience only the down moves as pain. A 20 percent drawdown needs a 25 percent gain to recover; a 50 percent drawdown needs 100 percent. Drawdown captures the asymmetry that volatility hides, which is why risk managers watch it first.
How much gain is needed to recover from a drawdown?
Divide the loss by what remains: a 20 percent loss needs 0.20 / 0.80 = 25 percent to recover, a 30 percent loss needs 42.9 percent, and a 50 percent loss needs 100 percent. The recovery math is brutal because the base shrinks. This calculator shows the required recovery gain for your worst drawdown.
What is a good maximum drawdown?
Lower is better, but context rules: a 10 percent max drawdown for an equity fund is excellent, while 10 percent for a bond fund is alarming. Compare against the benchmark's own drawdown over the same period. A fund that beats its benchmark's return with a smaller drawdown is genuinely doing something right.
What was the S&P 500's maximum drawdown?
About 57 percent peak-to-trough during the 2007 to 2009 financial crisis, and roughly 49 percent in 2000 to 2002. The 2020 COVID crash drew down about 34 percent in weeks. These episodes frame expectations: equity investors should assume a 50 percent drawdown is possible in their lifetime.
How long do drawdowns take to recover?
It varies enormously: the 2020 drawdown recovered in months, while the 2000 tech bust took over a decade for the Nasdaq to reclaim its peak. Recovery time depends on valuation at the peak and the economic damage underneath. Underwater duration, not just depth, is what breaks investor discipline.
What is the difference between drawdown and loss?
A loss is where you stand now versus where you started; a drawdown is where you stand now versus your highest point. You can be up 30 percent overall while sitting in a 20 percent drawdown from the peak. Drawdown measures the pain of the round trip, which is what tests nerves.
How do investors limit drawdown?
Diversification across uncorrelated assets, position sizing, stop-loss discipline, and holding some dry powder all reduce it. Hedging with options or trend-following overlays explicitly targets drawdown at a cost to returns. There is no free reduction: every drawdown control trades some upside for downside protection.
Should I choose funds by maximum drawdown?
Use it as a risk filter, not a return predictor. Past drawdowns describe how a strategy behaved in past stress, which is informative but not a promise. Combine it with fees, process, and whether the drawdown occurred in conditions likely to repeat.