Drawdowns show the pain an investor must sit through. A 50% fall needs a 100% gain to recover. The S&P 500 fell about 57% in 2007–09 and took around four years to regain its peak.
How to use the Maximum Drawdown Calculator
- Peak value
- Lowest value after the peak
- Expected growth rate (CAGR) during recovery
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the peak value, the lowest value after the peak and the yearly growth you expect during the recovery.
Tips
- Use the nominal annual rate and pick the compounding frequency your bank or broker states.
- Small differences in return or fees compound into large differences over decades.
- Run the calculation with a cautious, a central and an optimistic return to see the range of outcomes.
- Past returns do not guarantee future returns – nothing here is investment advice.
Common mistakes to avoid
- Comparing an APR with an APY or effective rate.
- Ignoring inflation, taxes and fees when judging a real return.
- Entering a percentage as a decimal (5 instead of 0.05 is correct here).
Inputs explained
| Field | What to enter |
|---|---|
| Peak value | Amount in your currency |
| Lowest value after the peak | Amount in your currency |
| Expected growth rate (CAGR) during recovery | In % |
What each result means
- Maximum drawdown = ([Lowest value after the peak] – [Peak value])÷[Peak value]×100
- Loss from the peak = [Peak value] – [Lowest value after the peak]
- Gain needed to recover = ([Peak value]÷[Lowest value after the peak] – 1)×100
- Time to recover = ln([Peak value]÷[Lowest value after the peak])÷ln(1 + [Expected growth rate (CAGR) during recovery]÷100)
Example values
How the main result changes when Peak value changes and everything else stays at the example values above:
| Peak value | Maximum drawdown (%) |
|---|---|
| 50,000 | 24 |
| 75,000 | -17.33 |
| 100,000 | -38 |
| 125,000 | -50.4 |
| 150,000 | -58.67 |
| 200,000 | -69 |
Formula
Maximum drawdown = (trough − peak) ÷ peakGain needed to recover = peak ÷ trough − 1Recovery time = ln(peak ÷ trough) ÷ ln(1 + growth rate)Worked example
Inputs — Peak value: $100,000; Lowest value after the peak: $62,000; Expected growth rate (CAGR) during recovery: 8 %.
Results — Maximum drawdown = -38 %; Loss from the peak = $38,000.00; Gain needed to recover = 61.29 %; Time to recover = 6.2 years.
Frequently asked questions
What is maximum drawdown?
The largest fall from a peak to a subsequent low.
Why does a 50% loss need a 100% gain?
Because the gain is measured from the lower value.
Is drawdown the same as volatility?
No – volatility measures all swings; drawdown measures the worst loss.
What formula does the Maximum Drawdown Calculator use?
Maximum drawdown = (trough − peak) ÷ peak.