Concept

Drawdown

The fall in value from a peak to a later low, as a percentage. The bigger the drawdown, the bigger the gain needed to recover: a 50% loss takes a 100% gain to undo.

Why we track it

It measures the pain an investment actually put people through, which average returns hide.

Asset allocationHow a portfolio is split among kinds of investments, such as stocks, bonds and cash.
BacktestingTesting an investing rule on historical data to see how it would have performed before putting money behind it.
Basis pointOne hundredth of a percentage point (0.01%), often written bp.
Bear marketA fall of roughly 20% or more from a recent peak, usually over several months.
Bull marketA long stretch of rising prices across a market, often dated from a 20% rise off a low.
Business cycle stagesThe economy’s long rise and fall: years of growth, a slowdown, sometimes a recession, then recovery.

Why we track it

Related terms