What is Max Drawdown?
Maximum drawdown is the largest peak-to-trough decline in NAV over a period. It answers: "If I invested at the worst possible time, how much would I have lost before the fund recovered?" It's always shown as a negative percentage.
How We Compute It
Track the running maximum NAV.
At each trading day: drawdown = (current NAV / running max NAV − 1) × 100
Max Drawdown = minimum of all drawdowns (the most negative)
At each trading day: drawdown = (current NAV / running max NAV − 1) × 100
Max Drawdown = minimum of all drawdowns (the most negative)
Computed in DuckDB using a window function: MAX(nav) OVER (PARTITION BY fund ORDER BY date ROWS BETWEEN UNBOUNDED PRECEDING AND CURRENT ROW).
Worked Example
Max Drawdown during COVID crash
Peak NAV: ₹320.50 (Jan 14, 2020)
Trough NAV: ₹198.20 (Mar 23, 2020)
Max Drawdown = (198.20 / 320.50 − 1) × 100 = −38.2%
An investor who bought at the peak lost 38.2% before the fund started recovering.
How to Interpret
- Max DD of −15% is mild. Most equity funds hit this during normal corrections.
- Max DD of −30% to −40% is significant. Happened in 2008 and 2020.
- Max DD of −50%+ is extreme. Only in the worst bear markets.
- The period you choose matters - 5Y will likely show a bigger drawdown than 1Y.
Related metrics
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