Catastrophic loss
InvestingDefinition
A portfolio loss large enough to permanently impair the investor's long-term goals. Different from a "drawdown" because some drawdowns recover; catastrophic losses don't.
Sources: excessive concentration (one stock blow-up), excessive leverage (margin call wipeout), forced exit at the bottom (panic selling, redemptions, divorce). Diversification alone doesn't protect — leverage discipline matters more.
Sources: excessive concentration (one stock blow-up), excessive leverage (margin call wipeout), forced exit at the bottom (panic selling, redemptions, divorce). Diversification alone doesn't protect — leverage discipline matters more.