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Drawdown: Overview, Risks, and Examples

By Kristi WaterworthUpdated Oct 16, 2025 at 7:11 PM | Fact-checked by Frank Bass

Key Points

  • Drawdowns show peak-to-trough stock price declines and measure investment volatility.
  • Treating drawdowns as unrealized losses, holding stocks can lead to recovery.
  • Investors' time horizons are critical since they can affect the impact of drawdowns on a portfolio.

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