Drawdown (Peak-to-Trough)

What it means: The percentage decline from an asset’s highest point to its lowest point during a specific timeframe.

In plain terms: "How bad did it get at the absolute worst?"

Example: If BTC went from $60k to $30k, the drawdown is 50%.

• Bonds: Very shallow (rarely exceeding 5-10%).
• Equities: Can be significant (20-50% during major market corrections).
• Crypto: Brutal; 80% drawdowns are a historical norm for the asset class.

How to use it: This is the best measure of your "pain tolerance." If you can't handle a 50% drawdown, you shouldn't hold assets that historically do that.