A-02Article
The simple math behind drawdowns
After a loss, you need a larger gain to get back to even. Small numbers make the point clear.
- Filed under
- Risk management
- Reading time
- 1 min read
- Instrument
- T-05
- Assumptions
- Stated in the notes
Contents 6 sections
In depth
If an investment falls 20%, you need a 25% gain on what is left to return to your starting balance—not 20%. Larger drops require even larger recoveries. That math is why risk control matters, especially if you are taking money out soon. Calculators on this site can illustrate the arithmetic; they do not predict markets or replace a plan built for you.
Key points
- A 50% loss needs a 100% gain to fully recover.
- Withdrawals during a drawdown can lock in losses.
- Use scenarios, not a single optimistic return.
Worked figure
| Loss | Gain needed | Scale |
|---|---|---|
| −10% | +11.1% | |
| −20% | +25% | |
| −30% | +42.9% | |
| −50% | +100% | |
| −75% | +300% |
Run the numbers
T-05Drawdown recovery calculatorChange the inputs and read the result. It runs in your browser.Not investment advice
Articles and calculators on this site are for learning. They are not a recommendation to buy or sell any security, and they are not tailored to your personal situation.
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