™A balance dropping from $10,000 to $7,500 has a 25% drawdown and needs a 33.33% gain from $7,500 to recover, ignoring new cash flows.
Risk & Portfolio
Drawdown
A decline from an asset or portfolio’s previous peak to a later low.
Plain-English context
Put the definition to work.
Specify the peak and interval, and adjust for external cash flows before treating an account-balance decline as investment loss.
Further reading and verification. Examples are hypothetical, not current quotes or recommendations. Product terms, tax treatment and market rules can change. Investor.gov — asset allocation and diversification