Maximum Drawdown Calculator

What the maximum drawdown calculator does

The maximum drawdown calculator measures the largest peak-to-trough decline in a series of portfolio values: how far the investment fell from a high point before it started to recover, expressed as a percentage of that peak.

Drawdown describes something investors feel. A 40% fall in the value of your savings is not abstract, and the calculator turns a run of values into the deepest loss you would have had to sit through.

How maximum drawdown is calculated

The calculator walks through your values in order, keeping track of the highest value seen so far, often called the high-water mark. At each new value, it measures how far the current figure sits below that running peak; that gap, divided by the peak and multiplied by 100, is the drawdown at that moment.

The maximum drawdown is the largest of those drawdowns. The peak must come before the trough: a low point only counts against the highest value that came before it, never a higher value that arrives later. The tool reports the peak that preceded the worst fall and the trough at its bottom, so you can see which pair of points produced the result.

Why drawdown matters

Two portfolios can end a period with the same final value and the same average return, yet feel completely different to own. One drifts gently upward; the other soars, crashes, and recovers. Maximum drawdown measures the losses along the way, not just the destination.

Deep drawdowns test discipline. The larger the fall, the more tempting it becomes to sell at the worst moment and lock in the loss, and a strategy whose drawdowns are too severe for a real person to hold through is of little use. Knowing the likely depth of decline in advance helps guard against panic.

The recovery problem

A loss and the gain needed to undo it are not equal. A 20% fall requires a 25% gain to break even, a 33% fall requires a 50% gain, and a 50% fall requires a 100% gain to return to the starting point.

The gap grows quickly as drawdowns deepen, which is why avoiding large losses matters more than chasing large gains. A portfolio that never falls far has a much shorter road back after a setback.

How to use the calculator

1. Enter a series of portfolio values in the order they occurred.
2. The calculator finds the largest decline from a running peak to a later trough.
3. It reports the maximum drawdown as a percentage, plus the peak and trough values.

You can use recent account balances, year-end fund values, or any ordered snapshot of an investment's worth. The values need not be evenly spaced in time; their order is what matters.

Reading the result

• A drawdown measured across a calm market understates the risk, and one measured through a crash may overstate the everyday experience. The longer and more varied the period, the more meaningful the number.
• Read drawdown next to the return earned over the same window, since downside risk only makes sense as a trade-off against reward.
• Drawdown is most useful when comparing like with like: two funds over the same period or two strategies through the same conditions.

Using drawdown to plan

Knowing that a strategy has historically fallen by a certain amount lets you decide, calmly and in advance, whether you could live with that decline again. If not, adjust your allocation before the next downturn, not during it. Matching your investments to your real tolerance for loss makes it more likely you will stay invested when volatility arrives.

This article is general information only and is not financial advice.

About This Maximum Drawdown Calculator

Use this maximum drawdown calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.