Adrian ReidFounder of Enlightened Stock Trading

Balancing Drawdowns & Returns for Long-Term Wealth Building

19 Sept 2025 · 1 min

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0:45

Adrian Reid explains why accepting bigger portfolio losses unlocks higher long-term returns. A 10% drawdown typically pairs with 10-15% annual returns, while tolerating 15% drawdowns can reach 12-20%. The trade-off is roughly one-to-one: more pain now means more gain later.

Questions this video answers

Being comfortable with a 10% account drawdown (he says if you accept a 10% drawdown, 'then you're not going to make 30% per year').

He suggests accepting a 15% dip could correspond to annual returns 'somewhere between ... 12 and 20%.'

He characterizes it as 'a one for one relationship'—larger tolerated drawdowns align with higher long-run return targets.

Chapters

The market will give us what it gives us. And some months will be amazing and feel ridiculously easy. And some months we'll go to work and we'll have to pay for the privilege as a wealth building machine while we do our day job, go about our lives, and build capital to the point where it doesn't matter if we have a drawdown. We've got enough capital to do whatever we want to do with our life. If you're comfortable to have a dip in your account or draw down your account of 10%, then you're not going to make 30% per year. You might make 10, 12, 15% if you have a really great portfolio. If you're willing to have a 15% dip in your account drawdown, then maybe you might make somewhere between sort of 12 and 20% return per year. It's a one for one relationship to draw down and long run return that you would be aiming for.