How to Calculate Maximum Drawdown for an ETF

Maximum drawdown is the largest percentage decline from a prior running peak to a later trough. Unlike total return, it describes a difficult period an investor would have experienced along the way.

Walk through the equity curve in date order, maintain the highest value seen so far, and calculate each current value’s percentage decline from that peak. The most negative observation is maximum drawdown.

Use aligned periods and the same return methodology when comparing ETFs. A shorter-lived fund may miss a prior market decline, making an unaligned comparison misleading.