Maximum Drawdown
Also: Max DD, drawdown
The largest peak-to-trough fall in a portfolio's value over a period.
Maximum drawdown measures the worst loss an investor would have endured from a high point to the subsequent low. It is often a more intuitive risk measure for families than volatility, because it speaks to the depth of pain rather than the variability of returns.
Drawdown matters because it, not volatility, is usually what tests a family's nerve. A portfolio can recover mathematically from a deep fall and still cause an investor to sell at the bottom. Sizing risk to a tolerable drawdown is often more useful than sizing it to a target volatility.