Drawdown recovery calculator
A fall needs a larger gain to undo it. Enter a drawdown to see the gain required, and how long that takes at a steady return.
Calculator
The max drawdown from a backtest or a Follow record works here.
Used only to estimate how long recovery takes.
Common falls
Gain needed to get back
+53.8%
after a 35% fall
- 100 becomes
- 65.00
- Multiple needed
- 1.54×
- Time to recover
- 5.6 years at 8% a year
On this page4 sections
Why the gain is larger than the fall
After a fall you have less money, so each percent gained is worth fewer dollars than each percent lost was. The gain is earned on the smaller base.
gain needed = fall / (1 − fall)
| Fall | Gain needed to get back |
|---|---|
| 5% | 5.3% |
| 10% | 11.1% |
| 20% | 25.0% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100.0% |
| 60% | 150.0% |
| 75% | 300.0% |
| 90% | 900.0% |
The relationship is gentle for small falls and brutal for large ones. Going from a 20% fall to a 40% fall does not double the work. It nearly triples it.
How long it takes
years = ln(1 + gain needed) / ln(1 + yearly return)
- A 50% fall needs +100%.
- At a steady 8% a year: ln(2) / ln(1.08) = 9.0 years.
- At 12% a year: 6.1 years.
Using this with the rest of the product
- Every backtest and Follow record shows its max drawdown. Put that number in here to see what the worst stretch would have asked of you.
- A strategy with a higher CAGR and a much deeper drawdown is not obviously better. Most people sell near the bottom of a fall they did not expect.
- The same arithmetic applies to a single stock. A position down 60% needs to rise 150% to break even.
What it leaves out
- Markets do not return a steady amount each year, so the time estimate is a rough guide.
- Money you add during a fall shortens the recovery of your account, though not of the investment.
- Some things do not come back. A single company can go to zero. A broad index has not.
Read next
- How each number is computedThe exact definition of total return, CAGR, volatility, Sharpe, max drawdown, hit rate and turnover as our engine calculates them.
- CAGR calculatorTurn a starting value, an ending value and a period into a yearly growth rate, and see what a rate does to a starting amount.
- Position size calculatorHow many shares to buy so that being wrong costs a set amount. Enter your account, the risk you accept, your entry and your stop.
Something here wrong or unclear? Tell us. Informational only, not investment advice.