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Glossary entry · Trade-offs
Drawdown
Definition
The percentage decline of an asset from its most recent peak to its current level. More useful than volatility for understanding what an investment actually feels like to hold during bad years.
Example
The S&P 500 had a 56% drawdown during the 2008 crash, and a 35% drawdown in March 2020.
From the lessons
Lesson · 04
Drawdown
This term appears in a longer lesson, where the idea gets the proper treatment with examples and a working visualization.
Read the lesson →Related
Trade-offs
Risk
The chance that an investment loses value — and how much it could lose.
Read →Volatility
How wildly an investment's price moves up and down. High volatility = bigger swings.
Read →Diversification
Spreading money across many different things so no single one can sink you.
Read →Bull & bear market
Long stretches of rising prices (bull) or falling prices (bear). Both end, eventually.
Read →