Drawdown calculator: the gain needed to recover a loss

A drawdown is a portfolio’s fall from its peak. It measures the real pain of an investment, the kind that makes people sell at the worst time.

Loss from the peak35 %Annual return afterwards7.0 %

Gain needed to recover

53.8 %

Years to get back

6.4

Gain neededSame percentage

Losses and gains are not symmetrical: -50% needs +100%. That is why limiting large drawdowns matters more than chasing the best years.

Calculated in your browser, nothing is stored. Education, not investment advice.

This calculator shows how losses are asymmetric: the deeper the fall, the more disproportionate the rebound needed.

How to use it

3 steps

01
Enter the lossThe fall from the peak, in percent.
02
Enter the returnThe annual return expected afterwards.
03
Read the reboundThe gain needed and the number of years back to the peak.

Formula

Gain needed = 1 / (1 - loss) - 1

Years to recover = ln(1 / (1 - loss)) / ln(1 + return)

Worked example

The Nasdaq after 2000

From March 2000 to October 2002 the Nasdaq lost about 78%.
Gain needed: 1 / 0.22 - 1 = +355%.
At 10% a year that takes ln(4.55) / ln(1.10), nearly 16 years.
The index only regained its 2000 peak in 2015.

A 78% fall took fifteen years to recover.

Limit the big falls

A portfolio down 20% needs +25%. A portfolio down 50% needs +100%. Diversification, a share of bonds and sensible position sizes are there first of all to avoid drawdowns you never recover from.

Questions and answers

What is the S&P 500’s maximum drawdown?

About -86% between 1929 and 1932. Since 1950 the worst falls were about -57% (2007 to 2009) and -49% (2000 to 2002).

How do drawdown and volatility differ?

Volatility measures the size of moves both ways; drawdown only looks at the worst fall from a peak, which makes it more telling for a saver.

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Notitia