https://v2.webnotes.in/tags/max-drawdown/Recent content in Max Drawdown on WebNotesHugoen-INMon, 18 May 2026 00:00:00 +0000https://v2.webnotes.in/max-drawdown/Mon, 18 May 2026 00:00:00 +0000https://v2.webnotes.in/max-drawdown/<p><strong>Maximum drawdown (max DD)</strong> measures the largest peak-to-trough decline in a mutual fund&rsquo;s NAV over a measurement period. It represents the worst-case loss an investor would have experienced had they invested at the absolute peak and sold at the absolute trough during that period.</p> <h2 id="interpretation">Interpretation</h2> <p>Max drawdown is typically expressed as a percentage:</p> <ul> <li><strong>5-15%</strong>: Conservative funds (debt, conservative hybrid).</li> <li><strong>20-30%</strong>: Balanced or aggressive hybrid.</li> <li><strong>30-50%</strong>: Pure equity (large-cap to mid-cap).</li> <li><strong>50-65%</strong>: Small-cap and concentrated equity.</li> <li><strong>65%+</strong>: Sectoral, thematic, or concentrated active funds during extreme corrections.</li> </ul> <h2 id="use-cases">Use cases</h2> <h3 id="risk-tolerance-assessment">Risk tolerance assessment</h3> <p>Maximum drawdown helps investors understand:</p>