Topic
Drawdown and Recovery: What a Loss Actually Requires
A loss and the gain that undoes it are not the same number. The loss is measured against the balance you had; the gain has to be made on the smaller balance that is left. The deeper the fall, the further those two figures separate.
The arithmetic is exact and it is also narrow. It says what a recovery requires, never whether one will happen, how long a real one takes, or what anybody should do about it.
Start here
Three finished pages cover this subject, and they answer different questions. Start with whichever one matches yours. None of them assumes you have read the others.
Calculate
Drawdown Recovery Calculator
Run the model on your own loss, balance, assumed return and contributions. It runs entirely in your browser: UBWHY does not receive what you enter, stores none of it, and puts none of it in a link.
Understand
Why Losses Require Disproportionately Larger Gains
Why a percentage loss and the same percentage gain never cancel, why getting back to the old balance is not the same as getting back to the original plan, and why the size of a loss is not a reason to keep holding.
Read the explainer: Why Losses Require Disproportionately Larger Gains
Compare
Recovery across drawdown depths
Seven drawdown depths against three assumed returns in one reference table: the gain each depth requires, and how long returns alone would take to regain the old balance.
Three different questions
- Calculate
- What does my own loss require, and how long would it take under my assumptions?
- Understand
- Why does the gain needed to get back exceed the percentage that was lost?
- Compare
- How much harder does the requirement get as the loss gets deeper?
The three overlap as little as they can. The calculator computes; the explainer teaches the mechanism and needs no figures at all; the comparison holds a fixed reference set so depths can be read against each other.
Three depths, from the reference set
The gain each loss requires to return to the old balance, and how long an assumed 6.00% a year would take to produce it with nothing added.
- 20% drawdown
- 25.00% · about 3 years 10 months
- 50% drawdown
- 100.00% · about 11 years 11 months
- 70% drawdown
- 233.33% · about 20 years 8 months
Outputs of a UBWHY calculation model applied to the assumptions above. They are not historical returns, expected returns, the performance of any investment, or a forecast. The full reference set — seven depths against three assumed returns, with every assumption stated — is on Recovery across drawdown depths.
Identical arithmetic is not an identical situation
Everything above prices one relationship: a percentage lost against the percentage needed to undo it. Two portfolios that are equally far down can differ in:
- what was held, and whether it can recover at all
- why it fell, and whether that reason has changed
- the order in which returns arrive, which this model does not represent
- what it costs to keep holding it
- what is being paid in, or taken out, along the way
- tax, which is modelled nowhere in this subject
- inflation, so every figure here is nominal
- how long the holder can actually wait
A steeper hurdle is a fact about two numbers. It is not evidence that a position will clear it, and it is not a reason to hold, add to or sell anything.
Nothing on this page or the pages it links is financial, legal or tax advice, and no product, provider or platform is named, ranked or recommended anywhere in this topic.
What this guide covers
The three UBWHY pages above are what has been finished on recovering from a loss. A new one is listed here when it is published, never before it exists and never as a placeholder for something that might.