Maximum Drawdown

I stopped working for a salary in August 2014. My theory was that if I kept my spending to less than my invested Capital earned (My Engine), I could focus on things that didn’t make money. To make this work sustainably, I had to cut and control my expenses dramatically and my Engine had to deliver about 10% real return in the long term (ambitious target). From August 2014 to February 2016, one of the two Funds I am invested in fell about 23% (< -16.5% p.a.). It then recovered so that by the start of 2018 I was over that 10% hurdle on average since I started. It then fell again by almost 27% and hasn’t recovered (yet). Still a positive return, but not sustainable (as is). I also have my own shares, and another fund with different (also bumpy) performance. These Drawdown periods are one of the measures of risk. The Fund I talk of had a Maximum Drawdown of 50% with 42 months to recover (vs Benchmark 54% and 66). Part of why we sell our time for a salary is the calm of a monthly pay-check.

Climbing Back Up