Maximum drawdown: the number fund pages don’t put first

Q: What is maximum drawdown?

Maximum drawdown is the largest peak-to-trough fall in an investment’s value over a period, usually shown as a negative percentage. It tells you the worst you would have been down if you held through it.

Q: Is a smaller drawdown always better?

Not automatically — lower-drawdown funds often have lower long-term returns too. Drawdown is best read together with return and risk-adjusted measures, and compared within the same kind of fund.

Q: Can I avoid drawdowns by selling first?

Timing the market is hard even for professionals — you must be right twice (sell before, buy back after). Backtests of defensive rules exist, but no setting is reliably best in advance. Past patterns do not guarantee the future.

SeeFund · educational series · 2026-09-06

Fund marketing loves the good years. The number that tells you what holding actually felt like is rarely shown first: maximum drawdown — how far your investment fell from its high, and how long it took to get back. This guide explains how to read it, and why it matters more than the best year in the table.

What maximum drawdown means

Drawdown is a fall from a previous peak. Maximum drawdown is the deepest such fall in the period you’re looking at — the largest peak-to-trough drop, shown as a negative percentage. Two things matter:

How deep — “from the top it fell about 35%.”
How long to recover — “it took about 400 days to get back above its old high.”

Example of a bad sequence: a fund falls 50%, then rises 50%. It is not back to even — it’s down 25%, because a 50% gain only gets you halfway back from a 50% loss. Recovery needs a bigger gain than the drop: a 50% fall needs a 100% rise just to break even. That asymmetry is why deep drawdowns are expensive.

How to read a drawdown table

Column	What it tells you
# Drop (e.g. −35.2%)	Depth of that fall from its prior peak
Peak → Trough dates	When it started and hit bottom
Recovered in N days	How long to climb back to the old high

Worth noting:

The biggest drawdown in a 10-year window is usually a bear market (e.g. 2020 COVID crash, 2022). Long “sideways” periods create many smaller dips.
“Recovered” is about price returning to the old peak — not about making money after that.
Drawdown counts peak to trough only; it doesn’t show every bump in between.

Why it matters more than the best year

Your behaviour is what actually loses money for most investors: people buy high enthusiasm and sell at the lows. Knowing a fund’s worst drop in advance is the cheapest insurance against that — if you can’t stomach a 40% paper loss, a fund that has historically fallen that far may not be the right one for you, however good its long-run chart looks.

Is a smaller drawdown always better?

Not automatically. Calmer funds (bonds, value, defensive) usually also grow less over the long run. The honest way to use drawdown is to read it together with return:

Same return, smaller drawdown → genuinely nicer ride.
Smaller drawdown but much lower return → you traded growth for calm; that may be fine — but know you did it.
Compare within the same category (growth vs growth, bond vs bond), not across them.

FAQ

What is maximum drawdown?

It’s the largest peak-to-trough fall in an investment’s value over a period. It shows the worst you would have been down (on paper) if you held through it.

Is a smaller drawdown always better?

Not by itself — lower-drawdown funds often return less. Read it with return, within the same kind of fund.

Can I avoid drawdowns by selling first?

Market timing needs two correct calls. Rule-based defensive strategies exist and can be backtested, but none is reliably best in advance — past behaviour is not a guarantee.

See every fund’s deepest drops and recovery time, shown not hidden: open SeeFund and check the “Where it hurt” tables. History is shown as history, never sold as a forecast.