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If I lose 40%, what does recovery really take?

A fall and the gain that undoes it are not the same number, and the gap widens fast. Set a drawdown and see exactly what getting back to even requires.

Your scenario

Capital before the fallFall from the peakAssumed annual return 1Assumed annual return 2Assumed annual return 3

Returns assumed for the time to recover: 5%, 7%, 10% a year, held constant. The gain required does not depend on any of them.

Gain required to get back to even66.67%A fall of 40% leaves $60,000 of $100,000, and it is that smaller capital which has to produce the gain. The figure is arithmetic, 1/(1-d)-1, and no view of any market enters it. The years further down are a different kind of number: they hold a return that has been assumed.

Why does the gain required outrun the fall?The gain that undoes a fall, by depth of fall

Every point here is arithmetic, with no return rate anywhere in it: a fall of 50% takes a gain of 100% to undo, and the two figures are equal only at a fall of nothing.

Show the figures

Fall from the peak	Gain required to get back to even
5%	5.26%
10%	11.11%
20%	25%
30%	42.86%
40%	66.67%
50%	100%
60%	150%
70%	233.33%
80%	400%

How long, if a return is assumed?Time to get back to even, at a return held constant

If 5% a year10.5 years

If 7% a year7.6 years

If 10% a year5.4 years

These years are the only figures on this page that rest on something assumed: a return that repeats without variation, year after year, which no market has ever delivered. They say nothing about how long any real recovery took. A return of nothing yields no number at all, because capital that does not grow does not come back to where it started.

Show the figures

Assumed annual return	Time to get back to even
5%	10.5 years
7%	7.6 years
10%	5.4 years

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