— the drop from a peak in your to the trough that follows, expressed as a percentage of capital.
The trap is asymmetry: losing 50% forces you to make back 100% just to break even. Losses compound against you. Keeping drawdowns shallow isn't timid caution — it's what makes long-term growth possible.
Hence the rule: size every position as a fixed percentage of the portfolio, so no bad run digs a hole you can't climb out of.
Takeaway. A good investor isn't judged by return alone, but by the depth of the holes they had to cross to get it. Read next: strategies to protect capital from deep drawdowns.
Definition drawn from the Yoseri glossary. Educational outlet — nothing here is investment advice.
The Lexicon · Glossary
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