Maximum Drawdown (MDD) — Peak-to-Trough Downside Risk

Understand Maximum Drawdown (MDD), how peak-to-trough declines are calculated, and how DCA and diversification reduce portfolio drawdowns.

Maximum Drawdown (MDD) measures the largest percentage drop in portfolio value from a historical peak to the subsequent lowest trough before a new peak is achieved.

Maximum Drawdown Formula

MDD (%) = ((Trough Value − Peak Value) / Peak Value) × 100%

Because a −50% drawdown requires a +100% gain just to break even, institutional allocators monitor MDD closely in our Portfolio Analyzer and use monthly SIP / DCA to accumulate units at market troughs.

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Frequently Asked Questions

Q.How can I reduce the Maximum Drawdown of my ETF portfolio?

Combine broad-market VN30 ETFs with lower-beta constituents, avoid leverage, and execute monthly Dollar-Cost Averaging (DCA) across market cycles.

Related Quantitative Terms

Volatility Tracking Error Sharpe Ratio NAV Expense Ratio Correlation

Disclaimer: This content is for educational and informational purposes only and does not constitute personalized investment advice.

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