Peak-to-trough loss measure.

Maximum drawdown measures peak-to-trough loss as a percentage. Critical risk metric beyond simple volatility. 100k portfolio falling to 60k = 40% drawdown. Recovery requires 67% gain (60k × 1.67 = 100k) - drawdowns punish asymmetrically. 50% drawdown needs 100% recovery. 80% needs 400%. This asymmetry is why avoiding large losses matters more than capturing every gain.

Example: portfolio peaked at 200k, fell to 130k (35% drawdown), recovered to 200k. Recovery from 130k requires 53.8% gain. Took 4 years from peak to recovery (typical for severe corrections). Investors who panic-sold at trough locked in 35% loss; those who held got back to break-even after years of stress.

Historical drawdowns: S&P 500 1929-1932: -86% (recovery to 1954 = 25 years). 1973-1974: -48% (recovery 1980). 2000-2002: -49% (recovery 2007). 2008-2009: -57% (recovery 2013). Stocks recover but not always quickly. Bonds reduce drawdowns substantially: 60/40 portfolio worst drawdown 2008: -32% vs -57% all stocks. Diversification matters most when it matters most.

Quick example

With peak value of 200,000 and trough value of 130,000 (plus recovery target of 0), the result is 35.00%. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.

Which inputs matter most

You enter Peak Value, Trough Value, and Recovery Target (optional). Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

What's happening under the hood

Drawdown = (peak - trough) / peak × 100. Recovery % = (peak - trough) / trough × 100. The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.

Using this well

Treat the output as one point on a wider map. Run it three times — a pessimistic case, a central case, and a stretch case — and plan against the pessimistic one. That habit alone separates people who stick with an investment plan from those who bail at the first wobble.

What this doesn't capture

Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. Treat the number as one scenario, not a forecast.